The Bandwagon effect – caution not credit is needed

We all know what the – Bandwagon effect – is. There is a lot of research literature in social psychology trying to understand why people who believe one thing one minute, suddenly ditch that belief system and appear to be proponents of a new belief system, often, in total contradiction to their previous views. The effect is related but distinct from the Groupthink phenomenon which I have written about extensively in relation to the way mainstream economics has maintained a hold on the public debate despite being unable to explain anything useful. Whatever the underlying explanations – social norms, conformity pressures, information cascades and the rest of it – the ‘Bandwagon effect’ is rampant at the moment among economists. It appears that everyone has become an expert on Modern Monetary Theory (MMT) and want to drop the term into their Op Eds, media articles etc despite, in many cases, writing in the not to distant past, ridiculous mainstream articles that are the anathema of MMT. I give those who are jumping on the bandwagon no credit at all. The reason is that these sort of shifts are dangerous. They typically misrepresent our work and attempt to interpret it within the old paradigm, which just leads to the general public, especially where the commentator has a high public profile, being mislead … as usual. Everyone, apparently is an MMTer now. But from what they say we know that is not the case. And just as this cohort swing to save face in what is a glaringly obvious empirical rejection of all the mainstream predictions and theoretical constructs, they will swing again and start talking about ‘budget repair’ and ‘inflation’ and ‘debt burdens on our grandchildren’ when the dust settles and the elites push to regain their dominant position. We should not be lulled into creating liaisons that are not sustainable or based on a true shift in view.

The ‘Bandwagon effect’ is everywhere at present – such that mainstream business media has declared that “We are all Modern Monetarists now” – referring tot he way in which the conduct of governments around the world are rejecting all the mainstream economics stipulates about fiscal and monetary policy.

That reference is a play on Milton Friedman’s 1965 declaration that “We are all Keynesians now” although most people do not know the full story behind that quote – it is not as it seems.

In Volume 86, Issue 27 of the Time Magazine (December 31, 1965, pages 64-67), a feature article talked about how the ideas of John Maynard Keynes, which were initially thought of as being “bizarre or slightly subversive” had become the orthodoxy in the Post War period and delivered a policy framework that could not only:

… avoid the violent cycles of prewar days but to produce a phenomenal economic growth and to achieve remarkably stable prices. In 1965 they skillfully applied Keynes’s ideas-together with a number of their own invention-to lift the nation through the fifth, and best, consecutive year of the most sizable, prolonged and widely distributed prosperity in history.

In that article, they quoted Milton Friedman, who they referred to as “the nation’s leading conservative economist” as saying “We are all Keynesians Now”.

Friedman objected to this association and wrote a letter to the Time Magazine which was published in the next issue (87(5) February 4, 1966).

Friedman wrote:

Sir: You quote me [Dec. 31] as saying: “We are all Keynesians now.” The quotation is correct, but taken out of context. As best I can recall it, the context was: “In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian.” The second half is at least as important as the first.

If you read Friedman’s 1998 autobiography (written with his wife Rose) – Two Lucky People – you will see that he admits that when he worked in the US Treasury Department in the early 1940s, he was using the ‘Keynesian’ arguments that were spreading as a result of the publication of Keynes’ – General Theory – in 1936.

But you also read that he was apparently “cured” of these leanings in the late 1940s.

In his contribution to Robert J. Gordon’s 1974 book – Milton Friedman’s Monetary Framework – Friedman (‘Comments on the Critics’) wrote that he was opposed to Keynesian interventions in the free market.

He further elaborated on the meaning of his letter to the Time Magazine in February 1966 in his 1968 book – Dollars and deficits : living with America’s economic problems.

He said that he was referring to the fact that:

We all use the Keynesian language and apparatus; none of us any longer accepts the initial Keynesian conclusions.

Of course, Friedman’s work laid the foundations of Monetarism, which in lay terms has morphed into neoliberalism in economics and created the macroeconomic policy myths that are presently being dismantled by the COVID-19 crisis (if not the GFC).

But just as Friedman was playing cute with the Time Magazine, it is important to be cautious about sudden reversals among financial market commentators and economists now, who for years have been pushing the standard mainstream line against deficits, but, who are all “MMTers now”.

On the one hand, it is a good thing that our work has now reached mainstream status and more people are realising that the main insights are undeniable, despite years of denial from those opposed.

But, as I have cautioned before, when there is a paradigm shift going on in any academic discipline, the resistance from the dominant but degenerative paradigm takes many forms.

The smarter members, who see the writing on the wall, try to capture the emerging paradigm and re-express it in their own language and concepts – just as the Hicksian IS-LM framework stole Keynes’ work not long after it was published.

Those on the periphery of the dominant paradigm, the media and commentators who continually reinforce the dominant paradigm through their journalism get stuck betwixt.

For years they have been passing on the mainstream message that deficits are bad/surpluses are good, that deficits drive up interest rates and cause inflationary spirals, that nations who spend ‘too much’ will be punished by the bond markets and eventually will find themselves insolvent. And more.

Then as the shift starts – and the COVID-19 disaster is driving that shift faster than I ever imagined, the journalists have a problem.

Many mainstream economists have gone quiet.

After all, what have they to offer? All their analysis and predictive activity has been rendered irrelevant.

But there are vestiges that hang on like grim death, and, they are slowly resurfacing – worrying about ‘how will we pay for it’ stuff – not realising that the government pays for it every time they click a keyboard to authorise some spending. It is gone – paid for. End of story.

The journalists, trying to stay relevant, as if they are part of the knowledge-making set, have to make sense of what is going on.

And so we get this strange lacunae – lots of writing about MMT without any of it really capturing what MMT is.

That is because the mainstream language and concepts are ill-suited to developing an effective and meaningful MMT narrative.

That is the problem of the ‘Bandwagon effect’. We get attention but also run the danger of losing the narrative to those who have a voice in the debate but haven’t the background to be able to use that voice appropriately.

So, on the other hand, the danger is that the public get assailed with a potted version of MMT, which degrades the richness of the emerging paradigm and its overwhelming superiority in explaining and predicting what is going on.

MMT is both a theoretical and descriptive framework but also a style of language and conceptualisation.

Most of those trying to scramble onto the MMT bandwagon miss out on most of this complexity and appear to be content to distill our work down to “printing money”.

While I am happy that more people are realising that for some years there has been a serious contest of ideas going on in macroeconomics and that the explanations and predictions of the mainstream have been hopelessly wrong for decades.

All the major events have been misinterpreted and misdiagnosed by the mainstream despite their revisionist attempts after the fact to save face.

That process is going ballistic right now and MMT is being caught up in it unfortunately.

Take today’s commentary (April 9, 2020), from the economics writer for the Australia’s national broadcaster (ABC) – Coronavirus chaos has hit the economy and the RBA’s approach to money printing is supposed to save it.

No-one who really knew what MMT was about would conclude from reading that title that the article would be about MMT.

Language is very important.

The journalist talks about the RBA “printing money” in reference to its recent policy shift towards buying government bonds in the secondary bond markets.

The reality is that it is not ‘printing’ anything.

The terminology is core mainstream talk and invokes all the taboos about central banks coordinating monetary and fiscal policy without the government issuing debt to the non-government sector.

The term ‘printing’ has no knowledge quotient – it is an emotional play to reinforce the ideology of the mainstream and ensure that the government continues to hand out ‘corporate welfare’ to the financial markets in the form of risk-free debt while at the same time leaving itself exposed to irrational political attacks about debt levels and insolvency.

At least the journalist had progressed to understanding that:

Australia’s central bank is now plugging in extra digits on its computer trading screens to artificially pump up how much cash it has on its balance sheet.

It’s creating money out of thin air. It doesn’t need to print the money via the Mint.

There is nothing “artificial” about it.

It is a simple asset swap – credit bank reserves, debit non-government debt accounts.

The article holds onto the household ‘budget’ analogy – “If you earn money, you have the capacity to borrow money and pay it back at some point, with interest” – to explain how the government will “pay for” the debt increase.

Which is a false statement when applied to a currency-issuing government such as Australia’s.

The article then tackles the “doesn’t money printing lead to hyperinflation?” question and tells the readers that:

… it’s unlikely to happen this time around, in Australia, because inflation was already very low to begin with.

Which is not the reason that the QE will not generate inflationary pressures.

Hyperinflation typically happens when there is a supply shock – a sudden contraction in supply relative to demand.

And, if any period was susceptible to an inflationary shock from the increased government spending, it is now, given the disruption in supply chains.

But then the fiscal injections are really just partially compensating for lost private spending.

And we also get the claim that is being repeated often these days that QE is not dangerous because:

The government issues bonds, banks buy those bond and the Reserve Bank then buys those same bonds off the bank. So, for practical purposes, the RBA now owns those bonds and will receive coupon payments from the government … and you could draw a line from the RBA to the government in terms of money flows …

However, by putting the private sector between the government and the Reserve Bank, you create a crucial buffer.

It means the Reserve Bank can’t simply write off the debt (which would compromise the integrity of the entire monetary system). It’s not even tempted to do that.

There is no crucial buffer achieved through this smokescreen.

The reality is that the private bond dealers now know that they can bid for the primary issue debt at the standard auctions (and the debt volumes will increase significantly as a result of the size of the intervention) – and then they be able to sell the bonds to the RBA next ‘day’ for a capital gain as the RBA credits the bank reserves.

So, the corporate welfare circuit is complete – the bond dealers swap reserves for the bonds and then make a nice profit from the RBA.

Moreover, the RBA can easily write the debt off with the same keystroke that allowed them to buy the debt.

Nothing would happen if they did that. Numbers would disappear from accounts.

And the RBA could operate with negative capital if it wanted with no consequence.

I don’t think the RBA will write-off the debt but as I have said before what we really have is the right pocket of government interacting with the left pocket – end of story.

So there is massive misinformation circulating from those who have a major voice in the debate.

Then it was the turn of the ABC youth station (Triple J) to enter the fray and here MMT gets introduced.

Yesterday (April 8, 2020), it ran a story – How come Australia suddenly has billions of dollars to pay for welfare? – and claimed that the $A200 billion stimulus package “had huge implications” in terms of the debt that would be issued.

They attempt to address the ‘burden on the grandchildren’ argument by explaining how QE works.

1. “the RBA are special kinds of public institutions tasked with managing the supply of money in an economy” – which is incorrect. The central bank cannot manage the ‘money supply’. The money supply is driven by the non-government sector’s demand for loans. The RBA has to accomodate the reserve implications of those demands.

2. “where does the RBA get its money?”

3. Well it can “print money”.

4. It correctly notes that it issues currency “out of nothing” and that capacity is “unlimited”.

5. It thinks the US Federal Reserve is the first central bank to go “nuclear” – by “buying unlimited amounts of government bonds” – well, the Bank of Japan has been doing that for much longer and the ECB has intervened in that way much more significantly than the Federal Reserve.

6. Because “the interest rate is so low right now, this money is essentially free” – which misleads. It wouldn’t matter if yields were higher. The repayment of the debt liability upon maturity is just another keystroke on a computer.

In accounting terms, the RBA would accept an instruction from the Treasury to shift numbers from the ‘outstanding debt account’ into the ‘reserve accounts’ – repayment done. Costless electronic transaction.

7. Then we get to MMT after Paul Krugman gets credit for exposing the myths of public debt being a problem. Whew!

And MMT is represented as advocating governments “just printing more money” to pay off the debt it issues to pay for the stimulus.

Yes, convoluted nonsense.

They write:

That may sound absurd – like shifting $5 from your left pocket to your right and claiming you’re $5 richer – but it’s an idea that’s suddenly shot to prominence as governments have taken on huge amounts of COVID debt.

Broadly, this is known as Modern Monetary Theory (MMT).

It is not recognisable as my own work at all nor that of any of my MMT colleagues.

The rest of the article mixes these sorts of misrepresentions with fundamental facts:

1. “MMT is based on a simple idea – countries are not like households” – well some countries are like households because they have surrendered their currencies.

2. “Australian (sic) can’t default on a debt that’s in Australian dollars, MMT supporters would say” – true.

And to “break this down”, the youth station sought advice from a non-MMT economist in the private think tank business.

Apparently, to explain MMT we get this:

As long as we keep producing goods and services and money keeps flowing through the economy, the national debt never has to be repaid.

That is nothing to do with MMT.

The risk free status of the Australian government’s debt arises because it is denominated in the currency that the government issues under monopoly status conditions.

It doesn’t matter what GDP growth is in that regard.


MMT advocates say, governments shouldn’t spend freely during periods of high employment, as the economy can’t increase production to meet the extra demand and would therefore be at risk of inflation.

Which is not what we say.

We say that when the economy is at full employment, the constraints on government spending more are ‘real resource availability’. They can still spend more but have to reduce the capacity of the existing users of those resources to use them.

That is the MMT statement.

Overall, the article was very supportive and finished with:

There are many who say MMT is ‘voodoo economics’ … However, in the last few weeks the criticism has died down and MMT has suddenly become a respectable economic idea …

MMT may offer a way out of what may be needless economic misery.

So I was happy with the intent of the article but the concern remains that in representing MMT as ‘money printing’ the same frames that the neoliberals use are being invoked.

You cannot shift a paradigm using the frames that consolidate the paradigm you want to abandon.

Then, we had the Sydney Morning Herald article from its ‘senior economics writer’ today (April 9, 2020)- Don’t add government debt to your list of things to worry about – talking about how the massive stimulus package that the Australian government has now legislated for will “be funded”.

Some debt figures – escalations – were quoted.

But the readers were told not to worry because with the RBA now buying huge volumes of government debt in the secondary bond markets, the answer to the “where does the money come from?” question is easy – “it will come from the Reserve Bank”.


Does that mean that one arm of government … is now lending to another arm of government? …

The answer is: well, yes.

We then see MMT being mentioned and represented as preferring “government simply print the money, rather than borrow it from the private sector.”

And then:

Our current scenario, with the central bank buying government bonds – albeit only once they’ve been bought by the private sector – is getting closer to a MMT world.

And while “We may one day have cause to worry about governments getting out the printing press and driving hyper-inflation”, apparently that day is not now because we have a health crisis.

We are also not “getting closer to a MMT world”. We have been living in that world since the fiat currency period began in the early 1970s (although Australia only floated on December 12, 1983).

For years, governments have been misusing their fiscal capacity by trying to run surpluses without reference to the state of the real economy. Now, faced with a health emergency, they are finding that capacity can be used in better ways.

No shift to an MMT world is going on. That is a fundamental misunderstanding of what MMT is and it should warn the readers that what else is being said is likely to be spurious.

But Irvine is clearly working hard to stay relevant with her readership. The ‘Bandwagon effect’.

But so hopelessly lost.

Earlier in the article we were told that the other option to “printing money” is that the traditional approach is that:

… it’s best if taxpayer dollars are spent under the watchful eye and approval of private financial markets.

That apparently avoids “handing a blank cheque to print money” to politicians.


… the way we are funding the response to this crisis, with the government borrowing money from the private sector and only having the central bank step in to buy bonds in the secondary market, can be expected to keep some discipline on government spending.

Which seriously misunderstands how the bond markets actually work, how yields are set and the spurious difference between a primary issue of bonds on one day, in the knowledge that next day, the RBA will buy all the bonds in the secondary market, and the holders will pocket a tidy capital gains while yields can be as low as the RBA wants.

There is no constraint on government spending as a result.

We should not give credit to this sort of garbled argument at all.

A bandwagoner no less. But one that is stuck in the mainstream paradigm, that is unclear about what is going on, and running with the herd to avoid being seen as out of touch.

And one that so misrepresents MMT that her readership will be excused for getting on Twitter and talking about ‘printing money’ and ‘regime shift’ and all the rest of the nonsensical representations that retard progress in achieving the sort of gestalt shift in knowledge that will take us out of this lunacy of neoliberalism.

To see what she really thinks, you don’t have to go back very far.

When the last fiscal statement (aka ‘the budget’) was released in April 2019, she was saying something quite different.

Go back to April 1, 2016 (April Fool’s Day) and her article – Why we should worry about fixing the budget – where the readers were assailed with this:

There has been no official recession in Australia for a quarter of a century, but the federal budget has been in deficit for eight years in a row.

Does that bother you? It should.

What it means is that in every year since the onset of the global financial crisis, the federal government has been raising insufficient money to cover the cost of outgoing expenses, like welfare, schools and health funding.

And there is no end in sight. On the latest estimates, the budget will remain in deficit until at least 2020-21, meaning a dirty dozen of deficits.

And it got worse:

Of course, every year that the government raises less than it spends, it must borrow to fund the difference.

It does this by issuing government bonds, calling on investors to stump up cash in return for a promise to repay at a certain future date, plus interest.

Every year we remain in deficit, the government has to keep issuing new bonds to cover its annual funding shortfall, adding to the stock of outstanding debt …

there is a cost to all this debt.

Annual interest paid on government debt is about $11 billion a year, rising to nearly $18 billion by the end of the budget’s forward estimates.

That’s about as much as the federal government spends on private and public schools currently. Money spent servicing debt could otherwise be spent on other worthy social investments.


… our budget should be in balance, or slightly surplus, on average over the economic cycle.

…. it’s unfair to future generations to leave them with the tab for the current population’s day-to-day bills.

… allowing the budget to remain in deficit even when the economy has recovered leaves us vulnerable to future downturns.

… If another GFC came along, the federal government would currently have little buffer to spend to stimulate demand. The public may well be less willing to support a stimulus package if the budget was already in the red.

… Plenty of reasons to get our fiscal house in order, and soon.

All the usual myths, lies, whatever coating you want to put on it.

The fiscal position is contextual. There is no “should be in balance” case without that context.

If, for example, as in the case of Australia, our external balance is in deficit continually (around 3.5 per cent of GDP historically), then a balanced fiscal position over an economic cycle will mean that the private domestic sector is recording a deficit of the same proportion of GDP as the external deficit.

That means ever increasing private debt holdings.

Is that desirable?

Is that sustainable? Probably not.

And what happens if that position is associated with 13.7 per cent labour underutilisation and stagnant growth? Is that the aim of fiscal policy?

It couldn’t possibly be if we cared about well-being and stability.

And the “ammunition” argument is plainly false as we are seeing now.

The Australian government can spend however much it likes, whenever it likes, irrespective of its current or past fiscal position. The capacity of the government to run deficits is conditioned by the state of the economy and the available real productive resources that are idle.

There is no concept that the government has to have financial stores before it can spend.

Everyday, it is creating liquidity in its currency in the economy. There are no ‘printing presses’ running. Typing numbers into accounts is the way most government spending is executed every day.

At the moment there are zeros being added to those numbers. They didn’t need any prior ‘surplus’ (like a squirrel in winter) to add those zeros.

I could point to many more articles – a continual flow of them all preaching from the same mainstream macroeconomics book.

And then on April 19, 2019, in the article – Tax stoush no substitute for real reform – we read:

Tax is literally the price we pay to sustain our democratic system of government and all that goes with it, such as schools, hospitals and roads.

And later (November 20, 2019) – Morrison is right about one thing – we’re sick of the drama – we read:

Today, our problems of slow growth and moribund wages are far more structural than cyclical. In light of that, Morrison is right – for now at least – to reject calls to sacrifice a return to budget surplus for emergency pre-Christmas tax cuts.

And so it goes.


The ‘Bandwagon effect’ is a turning point in the paradigm shift.

But those in the emerging paradigm need to remain vigilent and ensure that the homilies presented by those jumping aboard break cleanly with the framing and language of the mainstream.

Otherwise, we get nowhere.

And, here, I am thinking of what happens when the medical crisis is solved (if it ever will be). The mainstream fear mongerers will be out in force again – if they maintain a shred of presence in the debate – and the ‘Bandwagon effect’ journalists will jump the MMT ship just as quickly as they are now grasping to get a hold on it.

That is enough for today!

(c) Copyright 2020 William Mitchell. All Rights Reserved.

This Post Has 84 Comments

  1. Case in point

    Paul Mason in the New Statesman

    As if it has not been talked about over the last 20 years.

    Incredible when you think about it the man has no shame.

  2. I’m still waiting for a mainstream bod, or their tame journalists, to explain why the potential for the central bank to sell back old bonds into the market is materially any different from the potential for the Treasury to sell new bonds into the market.

    If one is a ‘credible threat’, then by definition so is the other. Which means – by the extension of the same logic – that there is never a need to issue bonds in the first place. The magic of expectations (they might!) sorts it all out.

    I’ve seen so many trotting this line out like the rosary over the last few weeks. Truly the new religions.

  3. On the main point of the article, we need to log complaints with the newspapers and demand printed corrections be published.

  4. Hi Bill I realise it is not your area of expertise but you have built your reputation on querying numbers and data, and going against the grain of mainstream thinking within your profession.

    I have read papers from reputable virologists and epidemiologists who question vehemently the data collection process that is feeding the reported COVID19 cases and deaths. This data is informing policy which some ‘outlier’ professionals believe is the polar opposite of what should be proscribed.

    There is no denying that we are experiencing a virulent outbreak but there are differences of opinion as to what it actually is.

    Have you looked at the numbers and the conclusions drawn from this apparent skewed data set? Are these ‘outlier’ professionals talking nonsense, or like MMT economist, not falling for the mainstream groupthink?

  5. There must be some relation between the money the govt puts into the private sector and the level of prices. If there are say 10 people available to work and all have jobs earning 100 a year, there are no taxes or govt services. Then due to disease 5 workers lose their jobs. The govt now employs them to do the same work as before but pays them 200 a year. Output is the same but income to purchase output has increased. As well as distributional impacts, price levels will move. Won’t they? You can put all the extra QE bells and whistles in but it still comes to the same thing. If the govt puts to many zeros on those balances it will show up in either consumer or asset prices. What am I missing? Besides my hair and a few brain cells.

  6. I speaking for myself, I gladly want people to talk about the “MMT world” as long as I can define it as this.
    The MMT world is a world were every voter knows the following facts about most nations that are not in the EU and especially not in the eurozone. I think MMTers should grab that phrase and run with it. Make it ours.

    1] The national debt is not a burden on your grandchildren because the bonds and interest are paid as the bonds come due with newly created dollars (or other national currencies). The nation’s debt is also the peoples’ assets, because every debt is another’s asset. It is a very good thing for the people to have more or larger assets.
    2] Banks don’t loan out saver’s money. They create new money with every single loan and this adds to private debt. See #6 below. Both national Gov. deficit spending and bank loans create new money. There is no way anyone can control this process in a free country.
    3] Deficit spending is necessary for most nations because its people want to save and if they do, that money is taken out of the economy, which reduces the GDP going forward.
    4] Deficit spending allows nations to import more than they export. If there is no deficit then slowly the money flows out of the nation to pay for its imports, which reduces the GDP going forward.
    5] The very deficit spending itself (that some people say the Gov. must sell bonds to fund) does itself provide the money to buy the bonds that are sold. Selling bonds does not suck up loanable funds from the economy.
    6] Despite all the above there *are* Real Limits on how much deficit spending there can be and not cause a problem. The problem being inflation, but never hyperinflation, unless the Gov. does something very stupid for years.
    7] Public Debt is not a problem but Private Debt (personal and corporate) is a huge problem and does cause most recessions when the people can’t make their next payment.
    8] And others.

  7. David Leitch

    Seems like 1+1=1 in your world

    How can 5 people do the work of 10 People? Half the input generally means half the output no? I know it’s not quite that simple, but I think your example needs to explain how those 5 workers are suddenly able to produce the output of 10 workers.

    Also, the aggregate income is actually unchanged (200×5)=(100×10)=1000

  8. The Tory Chancellor ( a multi-millionaire with a vast Georgian Mansion in Richmond, North Yorkshire) is happy to perpetuate these myths from which he has benefited so prodigiously:

    ‘By stressing that the use of the overdraft facility will be short term and that any extra borrowing would be repaid as soon as possible this year, the government has sought to reassure financial markets that the spiralling cost of Covid-19 will not be met by the Treasury ordering the Bank to print money to finance its spending.

    Both the chancellor, Rishi Sunak, and the Bank’s governor, Andrew Bailey, are keen to quash speculation that the cost of the lockdown will eventually force the government into monetary financing, also known as “helicopter money”.’

    So the sham goes on! And the Labour Party offer nothing and cannot throw any light onto this murkiness.

    I suspect that the Ways and Means money (I think the term goes back to the 17th Century?) will just be used and the ‘overdraft’ just forgotten about (like the unwinding of QE which was always imminent).

  9. “What am I missing? Besides my hair and a few brain cells.”

    The dynamic expansion of the economy from the increased dynamic flow.

    Look at it this way. If a new business starts up and employs 10 more people using money borrowed from a bank, do prices automatically go up because there is now more spending in the economy?

    If not, why should it be any different because the government does the same thing?

    If there is unemployment, underemployment, or misemployment there is extra capacity for spending. That is, after all, what new businesses tap when they start up.

  10. Steve_American
    Thursday, April 9, 2020 at 22:39

    In your list of fundamentals that you would like voters to understand about MMT you include the following:
    “Despite all the above there *are* Real Limits on how much deficit spending there can be and not cause a problem. The problem being inflation, but never hyperinflation, unless the Gov. does something very stupid for years”.

    This item was alluded to by Bill in “Flattening the curve – the Phillips curve that is”
    Tuesday, April 7, 2020

    He was referring to the in-built inflation control mechanism.
    I quote:
    “the term Buffer Employment Ratio (BER), which is the ratio of Job Guarantee employment to total employment to help us understand the dynamics of the framework.

    The BER conditions the overall rate of wage demands. When the BER is high, real wage demands and margin push by firms will be correspondingly lower.

    If inflation exceeds the government’s announced target, tighter fiscal and monetary policy would be triggered to increase the BER, which entails workers being shifted from the inflating sector to the fixed price Job Guarantee sector.

    Please don’t misunderstand that point. The government might, in the extreme situation, impose austerity on the non-government sector and force firms to shed labour.”

    If I was able I would have underlined the last paragraph because, although it isn’t mentioned much on these pages, I regard it as a very important influence on MMT’s acceptance as an ideologically acceptable working theory.

    Going largely on my historic experience of government control of large-scale industry I can foresee huge problems if it forces austerity on workers (notwithstanding that it also occurs under the guise of “the market” under other ideological policies).

    I wonder what your own views are on this practical implementation of MMT might be – and also invite other comments from interested parties.

  11. “practical implementation of MMT might be”.

    The practical implementation is that you turn private competition up to 11. When somebody squeals “but what about the jobs” you just say “that’s what the Job Guarantee is for”. And if somebody says “well I’m earning loads” you just say “then you’ll be able to get another job easily then because to have that high a wage there must be multiple bids in the economy for your talents – or you are overpaid”.

    Bags I get to say that to Lineker.

  12. Gogs,
    I see no mention of if you like my post or not. I would have like such.
    My point was the Bill said he didn’t like the phrase MMT world. I wanted to show that it isn’t so bad if we get out front about what the phrase means.
    I wants to end on an admission that there is a limit. It just isn’t money.
    To reply to your question.
    1] Bill didn’t say how likely such actions would be necessary. It matters a lot if such measures are imposed once in every decade or 3 times in every century.
    2] I keep calling for actual limits being placed in the Constitution on deficit spending. Not a balanced budget amendment. But rather an amendment the keeps deficits limited. Bill keeps saying that he can’t specify what such a limit might be that would cover all possible cases like the current virus crisis. I proposed that with a 2/3 vote in both Houses the limit could be set aside.
    3] If such a limit is in place maybe there would be room to slow the economy more slowly and not have to “impose austerity on the non-government sector *and* force firms to shed labour.” [My emphasis on the *and*,] I don’t know, I’m not an expert. But, I don’t think it is necessary to to plane for every strange set of circumstances. Which is a good thing because so far the various communist states have not done all that well with state level planning. Maybe it is never going to be possible to plan for every possible disaster ahead of time.

  13. “Is it too late for a rename to Modern Fiscal Theory?”

    IMHO, yes, it is. More than 20 years of work will be handed over to a mob of newbie “authorities”, and it will take another quarter century to make the world aware that this weird “MFT” thing is not crazy after all. Not that I’d be the one who would be doing all that Sisyphean work.

  14. Bill says, “I am thinking of what happens when the medical crisis is solved (if it ever will be). The mainstream fear mongerers will be out in force again – if they maintain a shred of presence in the debate – and the ‘Bandwagon effect’ journalists will jump the MMT ship just as quickly as they are now grasping to get a hold on it.” Words to the wise, and all the more reason that leading MMT economists should come together RIGHT NOW (albeit in virtual mode), put aside their minor differences and emphases, and issue a collective statement, as SHORT AND SWEET as possible, about what MMT is, what it is not, and the guidance it gives, in terms of capacities (fiat money, etc.) and incapacities (resource constraints, etc.) to both current and future governmental actions. Now is the PERFECT TIME to spell out what I like to call the axioms of MMT–a small, interlocking set of elemental principles–as Steve_American took a stab at doing above, which any minimally intelligent person can easily grasp. This post of Bill’s provides an excellent example of deconstructing the bandwagon of pseudo-MMTers. But since the best defense is often a strong offense, why not fashion and issue that collective “MMT Manifesto” ASAP? Who knows, it might wind up rivaling the Communist Manifesto and the pamphlets of Thomas Paine–perhaps even somewhat approach, though always at a distance, the continuing impact of a 2,000-year-old yet ageless story–in its power to move and mobilize men and women to change history and bring about the better world which more than ever, at this very moment, lies within their reach.

  15. “actual limits being placed in the Constitution on deficit spending. [ … ] If such a limit is in place maybe there would be room to slow the economy more slowly”

    But like I said the other day, with our “economist hats” on, we ask questions like “is the deficit an appropriate fraction of GDP?”, or “is the economy running suitably slowly?”
    If we take those hats off, and the little propellers on top stop affecting our minds, we ask questions like: “What are we doing?”, “What do we need?”, “What do we have?” Real debate on those things should settle all the questions. After that a debate on deficit limits would just be a piece of busywork, much as I think it is in the U.S. Congress, whenever it happens.

  16. The limits on government spending are inherent and automatic. . Once government runs out of effective supply the spending stops.

    That is the fundamental difference between mainstream and MMT. Mainstream says government spending should stop when a number reaches zero. MMT says that the limit is when government runs out of things to buy in its own currency at a price it is prepared to pay.

    The sole purpose of the financial restriction is to cause unemployment and suppress wages. It serves no other role.

  17. To be fair to David Leitch, I think Neil and vote for Pedro (nice ND reference ;o) above may be missing something in David’s maths.

    If I understand what David means:

    10 people earning 100 (total income 1000)

    5 people earning 100, 5 people earning 200 (total income 1,500)

    Now if that was the entirety of your economy, you’ve just increased total income by 50%, and would need to have a hell of a lot of slack in your economy to meet that, so yes, you may well see price prices (in your economy of 10 people).

    No-one in MMT would argue there isn’t *some* limit at which the government can (over)pay workers without inducing inflation.

    But then no-one in MMT has ever suggested doubling the wages of 50% of the wage force in an economy!

    That’s precisely why the JG wage is paid at a fixed minimum, living wage to act as a price stability anchor.

    Initially, because of all the current under and unemployment, introducing a JG means there will be a *one-off* net increase in income, as a percentage of the population that weren’t earning a living wage are boosted on to it, but that will actually be a very small percentage increase in total income across the economy, and as Neil suggests, there are strong reasons why that won’t cause inflation, because there is sufficient slack and competition across the economy for the extra income to be absorbed by extra production (in the face of rising demand, until genuine supply limits are hit, most firms will increase output to maintain/increase market share rather than put up prices and risking losing customers to competitors – and if they don’t, your anti-monopoly laws aren’t strong enough). Indeed there’s plenty of recent empirical data to show such increases in money supply are easily accommodated.

    Moreover, even if that initial payment did cause some push-through price rises, it will only be a one-off increase. Once the JG is established, it acts as an anchor – no-one earns more by dropping on to a JG – so the increased government spend on a new JG worker is always less than or equal to the wage that has dropped out the private sector (so David, your doubling of wages example simply isn’t something that happens). Hence you can have full employment AND price stability.

  18. “I keep calling for actual limits being placed in the Constitution on deficit spending”.

    Well assuming that as the accounting software governments are using is critical infrastructure they’re very likely written in C++, how about:


    float deficit_limit = FLT_MAX

    That should cover all bases for now!

    PS. See Neil’s previous comment for the actual answer on government limits…

  19. Re the Bank of England’s Ways and Means account, it seems this would be prohibited prima facie under article 123(1) of the Treaty on Functioning of the European Union (TFEU):

    Article 123
    1. Overdraft facilities or any other type of credit facility … with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of … central governments, shall be prohibited, as shall the purchase directly from them by … national central banks of debt instruments.

    However, paragraph 10 of Protocol (No 15) of the TFEU creates a specific exemption for the Ways and Means account unless and until the UK joins the euro(!):

    “10. Notwithstanding Article 123 of the Treaty on the Functioning of the European Union and
    Article 21.1 of the Statute, the Government of the United Kingdom may maintain its ‘ways and
    means’ facility with the Bank of England if and so long as the United Kingdom does not adopt the

    Up until the UK the transition period agreed with the EU ends at the end of this calendar year, however, the Bank of England must be bound by the prohibition on purchasing debt instruments from the Government. The Governor Andrew Bailey did not mention this in his article in the Financial Times on April 5, rejecting “monetary financing”.

  20. On this topic, one thing I wish we wouldn’t use is the term “deficit spending” – was having this conversation with someone on the Intro to MMT facebook group yesterday.

    Surely it’s just government spending (or better still talk about government *buying* which naturally puts the focus on the resource being bought rather than the means it is acquired – Neil Wilson, I loved the short blog you wrote on that once, but couldn’t find an archive copy of it when you took down your old stuff…).

    My problem with the term “deficit spending” is:
    a) it makes no logical sense – it’s the same action by the government, regardless of whether the accounting over some fixed period results in a surplus or deficit.

    b) related to the above, it makes it sound like the subject (the government) doing the action (spending) is in control of the final outcome ( the budget deficit or surplus) – when that result depends on the spending/saving decisions of the private sector, and while they may be influenced by government policies (tax rules etc), can’t be determined a priori by the government.

    I think this confusion (that governments’ choose what size of deficit they’ll run), leads to the confusion in the questions asked by steve above.

    E.g. I keep seeing questions like “what size of deficit triggers inflation?” which to me, completely misframes the question. And even worse, people answering questions related to what an acceptable size of deficit might be, by saying “you can keep running deficits until they cause inflation”.

    It isn’t the deficit causing inflation. Indeed if any increase in the money supply through additional government spending shows up as an increased deficit, then by definition the private sector is choosing to save that excess, and thus it isn’t causing inflationary pressure. If the presence of large amounts previously spent government money sitting around in savings were a trigger for inflation by the expectation they could get spent, then surely somewhere like Japan would permanently have inflation through the roof!

    Inflation shows up as inflation. And an MMT aware government has the necessary tools to deal with that – and they’re nothing to do with sitting limits on deficits.

    Indeed, as we saw in the early 2000’s, you can have falling deficits/surpluses due to lax private bank lending, and a population taking on private debt to live beyond their means, driving consistent above target inflation – so never mind magnitudes of change scaling with inflation – the direction of shifts in the deficit aren’t even consistent with inflation, making the concept of targeting a particular deficit to limit inflation a nonsense.

  21. Steve_American,
    I invariably see and appreciate your daily compositions and though I might not at times agree with your slant on things, I accept your interpretations.

    The same can be said of Neil Wilson whose pugnacious comments I have read over the years.

    Although I have not followed Bill for the full length of his blog period I have come to admire the fundamental logic and precision of his argument – indeed there is still a lot of deep theory that is outside my understanding – Looking back at the discussions of around 2011-2014 shows academics profound in their arguments.

    I think however, that in a way MMT came of age some time ago as regards the theory itself. Bill becomes quite aggressive in his stance against mainstream academics and their followers but to me the argument is already largely resolved in MMT’s favour.

    However, whilst MMT can be shown to be superior its next big test is whether its principles can deliver in the real world – in other words does it work in practice.

    It works in Bill’s world, and that of Randy Wray and brethren because they have a profound belief in the role of a Socialist (Marxist) society. They believe that if only the world was shown the purity of this alternative ideology they would throw out the utter garbage that has ruled society throughout the industrial age.

    You could say I am a sceptic but I tend to be influenced by experience. I have seen and felt the outcome of large-scale organisations under a highly competitive free-enterprise regime and under governmental control (of several compexions).

    When it comes to the crunch free-enterprise hides behind the discipline of the market, its owners arguing that it was they who took the risk and as such are entitled to the profit (not that I have come across anyone with hundreds of millions).

    In a downturn the private company will dispense with its workers (I am counting a depression in the same light as a massive oil price hike).

    An organisation under the control of a government in a democratic country like UK cannot realistically do that because it bound by different rules to that of the “market place”. The result is that a series of evasive attempts will be made to avoid the truth until in the end there is no alternative (bearing in mind living standards and other matters of equality to be maintained) to redundancy – and under MMT the JG.

    Bill implies that this is possible and acceptable, even to a society that is nurtured on government promises of a better life. By way of contrast to say, a Capitalist society which merely appeals to our insatiable materialistic desires.

    Again, I am keen to appreciate other viewpoints.

  22. BIll, I understand your cycnicism about these characters but I think you ought to tone down the contempt a bit, expecially if you are naming names. Most of these journos don’t really understand economics of any flavour but they have to churn out something every week. They just regurgitate whatever the nearest expert pours into their ear. You could be that expert, unless they see you being nasty about them on the internet.

    If you do get their ear cue them up with some killer questions for their old experts. They might genuinely get on board if they see the old guard flummoxed.

  23. Michael Berks I agree with your comment.

    For another thing this profit Intermediaries make by buying bonds from the govt and selling to the reserve bank will be competed away to a fair return if more intermediaries can enter the market. I was going to call it arbitrage but it’s not risk free, the reserve bank can stop its buying whenever it likes and the intermediaries left with more bonds than they bargained for.

  24. The German physicist Max Planck said that “science advances one funeral at a time. ” Economics too I think.

  25. steve_american

    I would have thought that if you are putting a limit on deficit spending it should be two sided. That is, it should be a range with both upper and lower limits, such as between 4% and 8% of GDP. I imagine one could figure this out by working backwards from some other policy target that means something, such as a desired domestic private sector balance, or a desired level of aggregate demand.

    But, why not instead focus on the meaningful things first? The size of the deficit seems like something to be thought about afterwards, rather than being the primary focus. The first thought should really be how are the nation’s real resources (labour, land, materials, etc) being used, and whether this is consistent with the political values the government of the day has.

    One example of a limit based on policy is “no crowding out” combined with a desired amount of output for a good. So the government decides it wants the output to be at least QL for a price P. In this case the limit on spending would be the things for sale that the private sector does not want to buy at the given price level. The limit in terms of dollars is P×(QL – Q) where P is the price and Q is the amount of goods bought by the private sector at that price level.
    But importantly – this limit is a function of what an acceptable number for “QL” is – there is no inherent reason that QL should equal the entire amount “left over” in the market. It is a policy choice about the sort of society a government wants, and the opportunity cost of taking the extra resources needed to produce (QL – Q).

    By creating deficit constraints, the conversation focuses on “the money” rather than “the goods”. It’s better in my view to have the discussion focus on what we want society to look like in “real terms” rather than “financial terms”.

  26. Michael Bergs, David Leitch

    You both seem too focused on “the money” – my initial point was about the “real shocks”. In the scenario, output would change after the shock. I don’t see how 5 people can produce the same output as 10 people. So, before any wage adjustments or other interventions I think we would see the following…
    …a supply shock in whatever output the company produces due having 5 less people working
    …a demand shock for medical goods and services due to those 5 people all being sick and likely wanting treatment

    This would put upward pressure on prices for both the output the company produces and for medical services.

    If you give the 5 remaining workers more money in exchange for more output, this will be “neutral” in terms of inflation, as you increase output, but increase money.

    It restores the output for the company, but it doesn’t fix the inflation problem caused by the initial supply shock.

  27. “There is a lot of research literature in social psychology trying to understand why people who believe one thing one minute, suddenly ditch that belief system and appear to be proponents of a new belief system, often, in total contradiction to their previous views.”

    “We should not be lulled into creating liaisons that are not sustainable or based on a true shift in view.”

    I am one of the few in this world who has happened to raise a child with Agenesis of the Corpus Callosum.

    This condition is where the tissue between the two hemispheres of the brain is either completely missing or a part thereof. This means the ability of either hemisphere to communicate with one another is impaired. At first blush, most would think this a bad thing – but please do read on.

    What we have noticed as our son has grown older is that it is virtually impossible to BS to my son if he already has exposure to the facts. I don’t mean just us as parents, it can be from any source, including media etc. Further, when asked questions, one must talk and use words in their proper meanings otherwise he wont understand.

    In layman terms, it means my sons condition means his emotional half of his brain can’t BS to his analytical side; whereas, a person with a fully developed brain can easily have its emotional half override its analytical half no matter how much factual evidence is staring the person in the face.

    Research into this condition suggests that many people have this condition in varying degrees and don’t even know it (I would suggest that many who do have this condition are less likely to follow the middle class template/goals of life).

    My reason for sharing this with you, is to help explain why the public at large are extremely difficult to shift by way of their belief systems except either through many many years culminating in gradual shifts, or through major shocks. This COVID-19 is one such shock, but alas, I can tell you as someone who works in the real world, most people are still clueless to how our monetary system works, and I have met only one person in all my meetings who has ever bothered to ask, ‘where is the Govt getting all this money from, and if they can do it now, why couldn’t they do it before?’ Instead, most people are still in fear mode thanks to the feeling of insecurity they are experiencing about food, bills, and of course toilet paper.

    As a truck driver, I made a joke to one person that if my normal work slows down, maybe they’ll call on us to deliver toilet paper – two days later I was asked to deliver 6 pallets of toilet paper to a local IGA supermarket, who had run out the day before (3 pallets sold in 20 mins). When I turned up, people were waiting and even some hovered around my truck.

    If you take anything from what I have shared with you, it is to understand that if you want to change things for the better, then I’m afraid you are going to have to use the same tactics as all your enemies are using – you have to play to people’s emotions. The majority of people are not interested in facts, only what makes them feel secure. As a successful salesman once said – you don’t sell a man a car by explaining all the cars features, you sell it by telling him how the car is going to make him feel.

    The ball is in your court.

  28. I agree with Grebo.
    I would like a “MMT for Dummies” proposal about what Australia (and New Zealand) might do to cope with the coming downturn/depression.

  29. In short you seem to be saying, be sure to get your daily dose of MMT framed economics from the horses mouth not from some horses arse.

  30. “In short you seem to be saying, be sure to get your daily dose of MMT framed economics from the horses mouth not from some horses arse.”

    Not exactly (although what you say is also correct).

    I’m more aiming at Bills whole approach to what he is trying to achieve, and not at the specific topic of this post.

    So what I am saying, in short, is to come from a different angle and try to reach out to the masses in some way and do it in a language they understand (emotions). It is pointless to talk about solving unemployment or solving job security by talking to securely employed people, particularly politicians and other economists. The unemployed or those who work always under fear of losing their jobs, do not read this blog, they do not buy his books or attend his university, they do not even know what MMT is or stands for – why? Unless Bill becomes a politician, then how is his message going to get to the average person who are the only ones who can make the real change in the end – when they vote.

  31. Michael Berks,
    As I see it the huge problem with the suggestion that everyone be taught to talk about the things being bought with the additional Gov. spending is that it would overwhelm the mind of every voter. How can they evaluate the spending on millions of different things?

    Also, the voters are already thinking of the deficit spending. Trying to change that to millions of other things is going to just shut their mind off.

    Combining all the things into one number is much simpler or the voters to understand.

    So, we need to still talk about deficit spending; *however* we can try to give it a different name. Something like ‘deficit spending, aka replacement spending’ Here replacement spending refers to the fact that this spending is intended to replace money that has been removed from current spending by being saved or by being sent out of the country because it bought an imported thing. After a few years maybe we can drop the ‘deficit spending’ part and just call it ‘replacement spending’.

    Someone said that I should suggest a minimum amount of replacement spending. I have done that elsewhere.I suggested that it be set at the amount of saving by the people and corps. + the amount of the trade deficit.

    A new point. If we assume the “The Club of Rome Report”, “The Limits to Growth” is very true, then does it make sense to organize the economy to use every single material resource at the maximum level? Yes, we want to use all the nation’s labor to the max. amount consistent with the workers having a life outside of work. We don’t want any involuntary unemployment. But, using all the material resources as fast as we can seems pretty selfish to me. I think some of you have not looked at the situation in this light.
    . . . It sounds like that is what a few of you want. That is, you seem to want the Gov. to look at the production of every ‘thing’ and be sure that the nation makes every single thing of that type that it can, if they can be sold to someone.

  32. Hi Bill
    Is it not true that only taxation can cancel government debt, It is the money itself that is the debt and not the bond so how can the central bank buying back the bonds cancel the governments debt?

  33. “Up until the UK the transition period agreed with the EU ends at the end of this calendar year, however, the Bank of England must be bound by the prohibition on purchasing debt instruments from the Government. ”

    The UK isn’t bound by anything in the EU treaty anymore – largely because there is politically no way to enforce it. Particularly not in the middle of a crisis and particularly not with the ECB evading Article 123 left right and centre.

    The UK is not a legalist country – despite the attempts by Europhiles to try and introduce civilian law. We’re still a Common Law nation.

    The restrictions on the operations at the Bank of England are solely religious and political.

  34. “On this topic, one thing I wish we wouldn’t use is the term “deficit spending” ”

    The term I’ve come to prefer is “effective spending”. That triggers the dual meaning “effective” in economic terms in that matched supply can be found and “effective” in the vernacular as in “useful”.

    “While the government can spend effectively it has the capacity to do so”.

    Learn and repeat at every opportunity. Getting that into the brains of others is the key to breaking the logjam IMV.

    MMT is about “ensuring the most effective government spending” – with the Job Guarantee being “extremely effective government spending”.

  35. “Now if that was the entirety of your economy”

    The point is that is never the entirety of the economy. There is always a dynamic feedback loop. Thinking about it in static terms always leads to the wrong conclusion.


    If somebody stops spending that causes a cascade effect that collapses things logarithmically. You then couple that with machine and financial leverage effects in a non-linear way. Supply is never exhausted completely, or completely destroyed. The bottlenecks and free ups pop up in surprising ways (for example the issue with flour at the moment isn’t milling the stuff, it’s bagging it – the commercial half of flour supply has no demand and the domestic half is swamped. Same with toilet roll. Both a symptom of getting the efficiency/resilience trade off wrong in volume production).

    One of the reasons I no longer try and do MMT with static words is that it misses the essence of the issue. You have to be able to watch the engine moving to see the point.

  36. “Yes, we want to use all the nation’s labor to the max. amount consistent with the workers having a life outside of work”

    It’s important to remember why you want to do that. Firstly it is so that the individual can feel valued and consider themselves to be of use to society. Always that first.

    But economically the reason to engage everybody is so that those we actually need to be fully engaged remain fully engaged. Why should anybody use their time to produce a surplus for you? Because you are using your time trying to produce something for them.

    We need a full week from vital people with the skills to do the job they do, utilising the machinery they can use more effectively than anybody else. The Corvid lockdown shows you who is vital to the nation, and frankly who isn’t.

    Note the mismatch with who earns the most.

  37. Neil Wilson

    “The point is that is never the entirety of the economy”…

    You’re preaching to the converted here re dynamic vs static, and I think we might be trying to delve too much into David’s post, and my response.

    But just to be clear, “the entirety of your economy” referred to stating there were only 10 people in this economy. I think we can agree that over a short enough time frame, while everything else may be dynamic, the number of people in my world are countably finite – and for the purposes of this dummy exercise, fixed (hey we’re in lockdown afterall ;o)).

    So let me rephrase what I said into the question:

    Would immediately doubling the wages of 50% of your workforce by government fiat have a knock on effect in prices?

    Of course there will be lots of dynamic feedback loops (and the fair question, “prices of what?”), and I’m not saying “yes, prices will rise by X” where you can a priori determine X. But I think we can agree that would still likely be pretty destabilising.

    But regardless, this is a bit of silly discussion, and one reason I try not to start with “if I had 10 workers” type scenario, as they often lead to this type of debate (if I’m not going to talk about the real economy, I tend to talk in vegetables instead). If we’re talking actual real economies, and magnitudes of change that might realistically be taken, I obviously don’t disagree with anything you’ve said.

  38. Hi Steve

    Yes, I totally accept, I don’t really expect everyone to switch “buying” for “spending” in regular use – but note I wasn’t suggest you need to state what it is they’re buying. Just literally replace the words. Try it now as a thought experiment, saying out loud:

    1) To cope with the economic impacts of the COVID crisis, the government the will need to dramatically increase government spending into the private sector…

    2) To cope with the economic impacts of the COVID crisis, the government the will need to dramatically increase government buying from the private sector…

    I think for most people, (1) immediately triggers the thought – “where do they get the money?” (or similar), where as (2) much more naturally leads to “what are they buying?”. Like I said, if nothing else, I think it’s an interesting thought experiment on how we use words.

    Regardless, as per using “deficit spending”, I was just suggesting dropping the “deficit” as it is an illogical qualifier, and why use two words instead of one. So literally, every time you want to say “deficit spending”, just say “spending” (or “government spending” if you really want to use two words). But since Neil was the one who (some years ago) inspired the the buying not spending thoughts in me, probably best I defer to him in his comment above and his preference for the term “effective spending”.

  39. Well I like the term “effective spending” as in the government should spend whenever it is effective. I think that is perfect terminology. I will use it now. Thanks.

  40. “Well I like the term “effective spending” as in the government should spend whenever it is effective. I think that is perfect terminology. I will use it now. Thanks.”

    Agreed. If that wasn’t clear from my comment – me too!

  41. “So what I am saying, in short, is to come from a different angle and try to reach out to the masses in some way and do it in a language they understand (emotions). It is pointless to talk about solving unemployment or solving job security by talking to securely employed people, particularly politicians and other economists. The unemployed or those who work always under fear of losing their jobs, do not read this blog, they do not buy his books or attend his university, they do not even know what MMT is or stands for – why? Unless Bill becomes a politician, then how is his message going to get to the average person who are the only ones who can make the real change in the end – when they vote.”

    Well said, Dean.
    What we can expect from the elites, is an intent towards sabotage.

  42. Is this an opportune blog in case anyone missed it at the time to post a discussion Neil Wilson had with Jo Firestone on ‘Real Progressives’ just over two years ago. I found his vision of the JG quite inspirational;
    This moment when a significant part of the world economy has shut down, I believe many people are thinking and talking about whether some good and necessary change could result. It is noticeable that our skies are suddenly empty of planes, traffic is massively reduced and the sound of birdsong much more evident. Is it not a moment that must be urgently grasped? Bill shares in this blog a very personal story that demonstrates the importance of emotion in our behaviour. Is it not the moment that rethinking what should be part of and how we should extend/change public service; transport, fiberoptic broadband, water, energy, education, health ad more will be received by a much more fertile public perception. I have written a letter to the new leader of our Labour Party and his shadow chancellor in the UK. I don’t suppose it will ever even be read but it might be of interest;
    Dear Keir and Anneliese,
    I write as a retired consultant haematologist who, incensed by the ‘under the radar’ unravelling of our NHS (and with the complicity of Labour), joined the Labour Party to vote for Jeremy Corbyn as Leader, recognising that he was alone amongst the contenders in offering a real alternative. I know I was not alone in doing that.

    I was disgusted at the behaviour of the PLP following Jeremy’s election in 2015 and joined the LP to vote for him in 2016 as I already mentioned. I believe the LP would have been in office these past 3 years if the PLP had behaved as they should have.

    Unfortunately even despite the excellent essential and entirely doable LP manifesto of 2019, the leadership including Jeremy and John McDonnell maintained the neoliberal language to which we have all been conditioned over recent decades. In so doing they laid themselves wide open to the pseudo question ‘where is the money going to come from?’.

    The reason for sending this email now as we approach the peak of the Covid-19 pandemic disaster, is that the truth about how money and the economy works has been well and truly exposed.

    I have been following Modern Monetary Theory for over 5 years now, since attending a lecture in September 2015 at The London School of Hygiene and Tropical Medicine given by Professor Bill Mitchell. An occasion when he was joined on the platform by Ann Pettifor and Richard Murphy.

    I have become increasingly convinced of the truth of the insights of how the economy actually works described in 25 years of scholarship by the increasing number (and influence) of those economists who identify themselves as belonging to the MMT ;school’.

    It may well be that a government of National; Unity becomes inevitable in the near future despite the political dangers of such a course. If that comes to pass, or even it doesn’t (the opposition will still need to work closely with government that is way closer than in ‘normal’ times), this moment is a unique opportunity for politicians of both main parties to come clean with the public about how the economy actually works.

    So far I have not heard anything that leads me to believe the new Leadership will do this. This opportunity may never come again and we will tragically slip into the same neoliberal straight jacket post covid.

    I hope this message arrives and is received in the good faith in which it is written.

    Mike Galvin

  43. @Haydon P Beare:
    ” Up until the UK the transition period agreed with the EU ends at the end of this calendar year, however, the Bank of England must be bound by the prohibition on purchasing debt instruments from the Government”

    In which case, the appropriate response from the UK govt to the EU should be the same as Arthur’s to the Black Night, in Monty Python’s Holy Grail:

    “What are you going to do? Bleed on me?”

  44. There’s a corollary as well. For example:

    “Helicopter money is ineffective, which is why the MMT view suggests we take a different approach”.

    Again that is true both economically and in the vernacular.

  45. @Neil Wilson – can I quote your comment suggesting “effective spending” as a better framing for government spending thank “deficit spending”? It seems like a powerful frame, which could be very useful in the coming months when “everyone’s an MMTer” and we have to educate a whole lot of people without, as Bill says, referencing frames that reinforce the mainstream ways of thinking.

  46. Is there really any essential difference between “effective spending”, and “functional finance”?

    If so, would it be?

  47. Effective is just better than functional.

    “Successful at producing a desired or intended result” as opposed to “designed to be practical rather than attractive”.

    It’s technically accurate, at least for the most part, but more importantly it has the correct marketing clout in the vernacular.

    Particular when you can cast “helicopter money” as “ineffective”.

  48. re:-
    Friday, April 10, 2020 at 18:43

    Priceless riposte!

    Thanks for making my day.

  49. I think Neil makes a good point. There is no ‘functional’ difference between functional finance and saying the government should spend when that spending would be ‘effective’- but it just sounds better to me- I mean how many people would oppose effective government spending? It is just the wording of it- but that often makes a big difference when talking to people.

    ‘Framing’ as Bill has often written about. That is good framing.

  50. Simon,

    I hope you will quote and use it.

    The notion arises from “How to Pay for the War” by Keynes – which has the shortest and best description of the principle of effective demand I’ve read on pp18.

    And yes functional finance describes how you do effective spending, but is a bit short on the supply side problems, ie running out of the supply of stuff (eg. ventilators, reagents) before you run out of people who can make use of them.

  51. This particular comments session seems to me to be among the exceptionaly stimulating and inspiring ones.

    A few thoughts:-

    I don’t share Steve’s penchant for setting a limit (or a range) on deficit spending. That seems to me to go dead against Bill’s insistence (which I think is totally valid) that mainstream framing be always eschewed. If that is abandoned, albeit as part of a well-intentioned effort at dumbing-down MMT for the masses, it just sells the pass. So what has doing it then achieved? To me it seems in the same spirit as British Labour’s fiscal rule. I can’t see that it can ever be anything other than a serious mistake.

    I like Newton’s idea of an “MMT Manifesto” in principle. But I’m struggling to envisage where its platform might be located in both space and time. To me it remains an abstraction, somewhat akin to Alice’s “Cheshire Cat”.

    “The limits on government spending are inherent and automatic.” (Neil Wilson).
    I disagree with this, as stated, Governments in the real world can spend, and some historically have spent, like crazy; there were no “inherent” or “automatic” limits in sight. They are an intellectual construct. Disaster of course ensued but that is not what is being referred-to here. If what is meant by this statement is that the (self-imposed) limits on an (imagined) by MMT-knowledge guided government are inherent in its possession of that knowledge – fine. But that isn’t what the statement says.

    @ Gogs
    I share your scepticism. I respect the fervency of Bill’s personal commitment to collectivism and “progressivism” but I think it’s utopian The JG concept however does I think have a lot of merit – but it needs to be seen to be workable in practice – in today’s world not the ‘thirties.

    About communicating MMT’s ideas:-
    the only economic theory which the vast mass of people ever have, or ever will, understand intuitively is “sound finance”. As expounded by Mr Mikawber. That’s because it corresponds exactly with their own daily life-experience. They don’t understand money and they never will. They most certainly don’t know what “liabilities” are – or care. They hate bankers – justifiably, distrust lawyers (ditto) and – as Michael Gove observed “have had enough of experts (ditto). Economics is a rarefied subject which most people have no desire to learn anything about. Egg-heads like us just have to try to live with all of that, because it isn’t going to change any time soon.

  52. I would be far more careful. The “bandwagon” is virtual and will disappear when the corona lockdown is over. There is a hysterical and nonsensical artice in today’s SMH, “Virus fight leaves Australia with a mountain of debt, so how will we deal with it?”. There is nothing special about the content, the title summarises it all. What is really interesting are the “comments” under the article. Nobody has a clue. Because nobody wants to have a clue.

    At least swift introduction of austerity ensures that the housing bubble will inevitably pop, when unemployment gets way above 10%. As a consequence young people may be able to afford buying houses at some point in the future. I feel sorry for the workers losing jobs in the construction sector but we are in a zero-sum game, someone (not me) has elected Morrison and Frydenberg.

    The second point is that when the corona crisis is over, Morrison will take credit for the “success” and get reelected. Nobody will remember his early resistance to the lockdowns or his grave mistakes made before and during the bushfire crisis, not to mention the criminal negligence in regards to climate change policy. Actually Albanese is not much better…

    The third point is that QE is used in the US as a vehicle to deliver massive government subsidies to defunct American corporations. From “Yahoo Canada Finance”
    “The central bank will expand its bond buying program to include investment grade debt as of March 22 but which was then downgraded to at least BB-, or three high yield levels, according to a statement released on Thursday. It will also buy exchange-traded funds that track speculative-grade debt, which increased the most in a decade after the announcement. Overall, the programs will support up to $ 850 billion in credit.
    These latest steps provide a huge lifeline to companies like Ford Motor Co., which will now benefit from the support of one of the largest sources of demand in the world. Its bonds posted the largest gains in the high-yield index, with 7.45% debt owed in 2031, up 18 cents on the dollar, according to Trace. The cost of protecting the automaker’s debt against default for five years has dropped from nearly 200 basis points to around 771 basis points, according to ICE Data Services.”

    Maybe the Americans should stop accusing Huawei of being propped up by the Chinese government.

  53. Mr Shigemitsu – re the Holy Grail – I think Andrew Bailey might be very happy with that type of response on many EU issues!

    As a Leaver, Rishi Sunak would too.

    Their lawyers would spoil the fun a bit.

    Article 87(1) of the Withdrawal Agreement means the Commission can penalise the UK for a Treaty breach during the transition, up to 4 years after the transition period ends.

    That’s what happens when you give up your sovereignty – as Bill, Ashoka Mody and a few other economists have pointed out.

    Even Varoufakis might be fully on board with the sovereignty argument, after the most recent Eurogroup disgrace on Thursday night.

    But that problem is nearly over for the UK.

    From next year Parliament is free to legislate to demand the Bank of England directly purchases Government bonds, whenever that’s in the national interest.

    It will just be a question of winning the argument rather than breaking the law.

  54. It doesn’t matter what the documents say. What matters is what the government does.

    Brexit is about eschewing legalism and pressing on with what is required.

    Always remember there is no law without enforcement and parliament has the power to change the law retrospectively as it sees fit.

    The choice is always political and at the moment petty bureaucracy isn’t going to get a hearing no matter what words are written in dusty judgement.

  55. RobertH

    How can governments spend when there is nothing available to buy? That’s the point at which government spending stops automatically and inherently.

    If it is to be stopped any earlier than that it is for those who wish to do so to explain why their mechanism is superior to elected parliamentary scrutiny. Parliament authorises the spending after all.

    They won’t be able to without elevating unelected winks above those the people have chosen.

  56. Dear Ruru,

    According to my understanding. I think you are correct. Bonds are money with interests, and now the central bank will receive interests from the government instead.

    The government debts are still there even though it is not in the non-government sector, but with the CB.

    And it (the debt) can only be cancelled by taxation, or depleting the reserve account of the people who sold the bond to the central bank.

    I am pretty sure I am right (based on all the knowledge sharing from Bill and all other core MMT people.

    Best regards,

  57. @ Haydon P Beare:

    “Article 87(1) of the Withdrawal Agreement means the Commission can penalise the UK for a Treaty breach during the transition, up to 4 years after the transition period ends.”

    How many divisions has Ursula von der Leyen? ; )

  58. Mr Shigemitsu – good point!

    So my question to you and Neil is: why do Eurozone countries in particular act as if they’ve ‘surrendered their currencies’, as Bill says above?

    Either they mistakenly believe the Commission has tanks stationed on the frontier, or they are seriously reluctant to break international law by instructing their own banks to create accounts in their favour.

    For the UK the issue really is academic because the Ways and Means account enjoys an exemption under the Treaty, as I said. No need to issue bonds to the Bank, the Government could create all the money they need (now that they have a majority in Parliament).

    But otherwise they would never break the Treaties.

    Indeed, Britain didn’t need to leave the EU at all if the EU Treaties have no practical force. Why bother issuing a withdrawal notice? It could have stayed in and ignored the Treaties. So could any Member State. It is true, instances of Member States collectively ignoring the law do happen in the EU, as Neil suggests – there is no law without enforcement.

    It’s not true with regard to these issues of finance. The Outright Monetary Transactions programme was challenged in the Court of Justice in the Gauweiler case. QE was challeged in the Weiss case. The surnames tell you from which Member State the impetus for enforcement comes.

  59. “How many divisions has Ursula von der Leyen?”

    I believe she had a few when she was Germany’s defence minister.

    But she p—d them off so much they probably wouldn’t have accepted her instructions anyway.

    (That was why she was dispensed-with by Merkel and presented as a gift from Germany to the feminist mafia – sorry, I mean lobby of course)

  60. “The surnames tell you from which Member State the impetus for enforcement comes”

    So can you explain why, the country from which that impetus comes being Germany, that country continuously(?) since the Stability and Growth Pact’s inception (at its own and France’s instigation) has been in breach of its excess balances rules – with total impunity?

    Or why both France and Germany contemptuously brushed aside any ideas the Commission might have been so naive as to entertain that they be subject to the very same sanctions they themselves had insisted be specified for breaching the SGP’s limits on government debt (or was it on maximum deficit – I forget) while poor little Portugal was arm-twisted into paying-up?

    It seems the laws are broken – in either the letter or the spirit – by the powerful whenever they feel so inclined

  61. “or they are seriously reluctant to break international law by instructing their own banks to create accounts in their favour.”

    Or they have their central bank running on computers owned by the Bundesbank. How do you think TARGET2 actually works in reality?

    The reason the Hellenic central bank was unable to break its link to the Euro – despite having the political cover to do so due to the Greek elections – was because they don’t run their own computers any more. So the ECB just threatened, in a veiled way, to turn their payment system off.

    Another victim of outsourcing and centralisation. Another victory for ‘efficiency’ over ‘resilience’.

  62. Hello Bill and gents, I came to MMT through the TrippleJ article and am very thankful for it.

    What you should give it credit for is especially this sentence:
    “The reason it can do this – and this is the brain-melting part of MMT – is that taxes do not pay for government spending but are just a way of managing inflation.”

    A couple of Wray and Mosler videos later, reading the introduction in Wrays’s Primer and now this blog (via the Money multiplier myths article) and the paradigm has been easily shifted for me. Arguably my interest in banking and Austrian past possibly set me up better than some others to make the mental leap.

    In defense of some of the above articles, and as a neoliberalist as of only a week ago, I’d like to argue that a paradigm shift always occurs via a muddy intermediate state where the new world is attempted to be described in the terms and language of the old world. And some people’s brains luckily make the switch despite the mud. Even though the language might be very damaging from your point of view, the simple existence of a “bridge” that some manage to successfully cross is more important and ultimately gets a critical mass of people to the other side.

    If I may leave another observation, this blog’s sentiment feels very value-political and negative. As I commented on the Alan Kohler podcast YouTube video, the ending could have arguably had a better influence if it wasn’t just left at the dissatisfaction/status quo state of “can’t trust pollies, fiscal balancing bogeyman keeps them in check” but if it instead offerer the simple solution of legislating automatic inflation balancing policies – to keep the same pollies in check.

    Anyway thanks for the great economics work. The theory is so simple and beautiful. I can now finally watch the dance of the seven veils between CBs, treasuries and other market participants with great pleasure.

  63. @robertH 1:26

    Where the differing responses of the European Commission towards Germany/France on the one hand and Greece/Portugal on the other is concerned, the response of the Athenians in the Melian Dialogue remains instructive:

    “the strong do what they can and the weak suffer what they must … if any maintain their independence, it is because they are strong, and that if we do not molest them, it is because we are afraid”

  64. I think countering the ignorance or evil propaganda of mainstream economists and journalists about the “hangover” of so called intergenerational and unsustainable debt will be crucial when and if the crisis passes. The aftermath could well be reimposition of austerity, reduction of wages and conditions, government service cuts and further privatisations.

    As others here have commented, MMT is resonating with some but most people are still clueless about it, do not understand money and where it comes from. Very few of my family get it.

    Someone suggested an MMT for dummies approach but getting this to the. Masses is very difficult when most of the media has “go to” commentators who uncritically parrot the warnings. Australia’s media is heavily concentrated so letting the cat out of the bag is very difficult. The cat is slowly emerging out of the bag though.

  65. In the AFR

    “..”If the Reserve Bank buys the government’s bonds, they’ll receive the coupon payment of the bonds from the Treasury,” the economist explains. Every year, the Reserve Bank remits back to the government a dividend payment from their activities….”

    And so on. However, no connecting the dots – yet. Amazing.

  66. robert H

    Re the Stability and Growth Pact breaches, I see your point, and that’s what I had in mind when I said that instances of Member States collectively ignoring the law happen in the EU.

    Your comment interested me to take a closer look at what happened in detail on that issue, though.

    It looks like the enforcement mechanism for “excessive government deficits” (in art 126 of the Treaty on Functioning of the EU) depends on a vote by the Council of Ministers (from each EU state), after a recommendation by the Commission.

    So in this case it’s an inherently political ‘tribunal’ if you like.

    Accordingly, when the Commission recommended that France and Germany be forced to reduce their deficits, they rounded up enough support from other EU Ministers to ensure the decision was to hold the enforcement procedure “in abeyance”.

    The Commission was incensed apparently, so it appealed to the Court of Justice.

    In its decision (in case C-27/04) the Court said that it would not uphold the Commission’s recommendation, because only the Council had the discretion whether to commence the enforcement procedure.

    The Court would not make the decision for it.

    But it also said that the Council’s decision was invalid, because the option to hold the procedure in abeyance was not technically open to it. It was only open where the offending State had actually taken some appropriate action. It could, though, do nothing at all (at least for a time, if not permanently) if the required majority for an enforcement decision was not achieved.

    So the Commission won to the extent that the Court held the particular decision invalid. But it was a Pyrrhic victory because it was clear that the Council could keep stalling.

    At that point the Commission gave up.

    Ashoka Mody has a good section on this episode in chapter 3 of his book (although he concludes that the Court “confirmed the Council had acted within its rights” – that is not quite right).

    Does this case prove that the stronger Member States always prevail over the weak in the EU? I wouldn’t put it that strongly, because the enforcement mechanism is oddly political in this case – usually the Commission itself would have the enforcement power, not the Council of Ministers.

    Do German and French views carry a lot of weight in the EU? Definitely. But I don’t think you can throw the whole idea of impartial law out. There is a balance in the end between the demands of the powerful states and the idea of justice. The real problem is that the economic constitution of the EU is rotten at its core, so even the impartial application of the law must increasingly cause more harm than good.

  67. [b]@Haydon P Beare[/b],
    Bare with me here for a minute.
    It seems to me that in our nuclear age war is not a good way to steal wealth from a nation’s neighbors any longer.

    However, does this mean the all nations will stop trying to steal wealth from their neighbors?
    Clearly, this is not so.

    So, how can nations steal wealth from other nations? They now have to use economics or the market, aka international trade.
    What nations are doing the best at this?

    I could postulate that there is a conspiracy going on. The leaders of Germany and Netherlands, etc. conspired to trick other nations into the EU and then the eurozone. Once the eurozone was in place Ger., etc.could export more to other nations than it imported from them. Nations had gotten used to this because after WWII the US was willing to export more than it imported and never demand payment, at least functionally. So, when Ger., etc. started doing this it didn’t sound off loud enough alarm bells.
    . . The effect over time was to suck the euros out of nations like Greece, Italy, Spain, etc. This could go on until they could not pay any longer, then Ger., etc. started lending them euros. Lending to people or banks not to the national govs.. Ger., etc. banks also bought those nations bonds, perhaps thinking there was no default risk now that the nations were in the EU & EZ.
    . . In the GFC/2008 the Troyka forced loans onto Greece, etc. to bail ‘them’ out, but really to bail the Ger., etc. banks out. The poor nations still owe for the private loans. So, the rich nations are still sucking euros out of the poor nations.
    . . As our Bill has said (IIRC) giving up your nation’s currency is giving up all ways for a nation to protect itself from such economic “warfare”.
    . . Germany loves this situation. It has not changed its stripes. It is still stealing wealth from other nations. It just uses economic means or “economic warfare” to do it. The other nations have no way to fight back until they leave the EU. Their people now see this. The question remaining is “will those nation’s leaders follow the will of their people, or be bribed or coerced into staying in the EU like Greece was?”

  68. @ Haydon P Beare

    Very interesting.


    @ Steve_American

    I think your account fits very well. I also think that it and Haydon’s are complementary.

    But I think you’re being too hard on the Germans. They’ve only been able to do what they’ve done (which, let’s face it, is look after their own interests just like everybody else) because all us others have been complicit – for our own ends. Especially the French but above all the Americans.

    My favourite bugbear is the Americans, who after the war was won double-crossed us and then stitched us up whilst prating sanctimoniously about the “evil” British Empire as a cover for their own totally ruthless expansionism, at our expense and to the Germans’ benefit. Along the way they spawned militant salafist slamism as the price paid for winning control from us over Saudi-Arabia’s oil, whilst simultaneously sponsoring zionism.

    What an explosive cocktail they succeeded in mixing!

    (Cock-up, rather: unbelievablr ineptitude!).

  69. Come on already- “the Americans, who after the war was won double-crossed us and then stitched us up ” ? Surely you could put that more diplomatically? Maybe something like the Americans who helped save our country and helped us win the war and then maybe helped stitch things up but had their own ideas about how things would go after that differed from what you might have preferred?

    There is a whole lot of fair criticisms of the USA. Your one here is not.

  70. @ Jerry Brown
    “There is a whole lot of fair criticisms of the USA. Your one here is not”.

    (quoted from “The Poliical Economy of Europe since 1945: A Kaleckian perspective” by Joseph Halevi. Institute for New Economic Thinking working paper number 100 June 2019):-

    “In relation to Britain the US position on exports became apparent just after the signing of the Lend and Lease (sic) program. Wasington made clear to London that the opening up of the Sterling area balances could become part of the repaymentpackage. By the time the Bretton Woods conference was convened Britain had been compelled to abide by US demands. Michael Hudson (2003) has explained at length the US strategy of hollowing out the Sterling area in favour of the Dollar area. He also showed how the British Treasury quickly understood that opening the Sterling balances would bring a crisis in the the UK’s external payments. In his book Hudson reported how the British Treasury went so far as to suggest that the Government declare baankrupcy thereby compelling the US to bail out its most important ally.

    “From the mid (sic) of the 1940s onward Washington relentlessly worked to pry open the Sterliong area and the zones of British influence until their final dissolution. Undoubtedly one of the most important of all these activities was the unwritten agreement between Roosevelt and the Saudi king Abdel Aziz Ibn Saud on the 14th February 1945 on board the US cruiser “Quincy”. From that meeting immediately sprang the special relation between the United States and Saudi Arabia expressed in the unequivocal political and military support of the US Administrations (sic) to the House of Saud and to its religious and political regime.”

    (Joseph Halevi is described as “retired from the University of Sydney and currently professor at the International University College of Turin”. Make of that what you will, and without doubting that Halevii probably has – like the rest of us – his fair share of axes to grind, I don’t think he can be assumed to be an uncritical protagonist on behalf of the (deceased) British Empire, or a gullible fool. You will note, too, that he cites Hudson).

    “Surely you could put that more diplomatically?”

    Why, pray? What’s wrong with the unvarnished truth. It’s all in the past anyway, and history is history, however unpalatable. Personally, I still cringe whenever reminded of the Amritsar massacre – one of the most despicable acts ever carried-out by my countrymen.

  71. Robert, you could at least recognize that the United States provided all kinds of material assistance to Britain and many millions of soldiers of which nearly half a million died. And a lot of resources to the Russians who really did more in Europe while the US also was dealing with Japan.

    It was really the phrase “after the war was won” that got me going here because it is not at all apparent the war would have been ‘won’ from your perspective without the US involvement on the side of Britain. And obviously the US was determined to pursue its policy goals after having made that sacrifice in the worst war in history. And determined that such a thing wouldn’t happen again. But calling that a “double-cross” is not fair.

  72. “Robert, you could at least recognize that the United States provided all kinds of material assistance to Britain ..”

    Certainly I acknowledge that – and indeed that it was being provided even while the USA was still ostensibly a neutral country, before Germany by declaring war caused the USA to become Britain’s military ally (to Britain’s immense relief).

    And of course you’re right that Britain could never have defeated Germany alone. But first Hitler attacked his ally the USSR (which – we shall never know – might in alliance with Britain have accounted for Germany’s eventual defeat) and then as a side-effect of Pearl Harbor came the USA’s entry into the European theatre as well, which ultimately clinched matters (not a moment too soon!).

    So much – and it’s a lot – on the credit side. But let’s not be starry-eyed. While joining-in the war (which let’s not forget had up to then been successfully opposed by the vocal isolationist lobby, which was neutralised by the actions of Japan and Hitler) was a momentous step by any reckoning it was certainly not undertaken just to help Britain: the USA itself was directly threatened.

    As an added benefit (though certainly not a reason for joining in) by fatally weakening an already-in-decline but nevertheless still great-power British Empire the war greatly accelerated America’s supplanting of that rival on the world stage, a consummation devoutly-wished and actively assisted by American policy. Any other power in America’s position would have done exactly the same.

  73. If I may point this out.
    From my POV you are getting sidetracked from how Germany is currently using ‘economic warfare’ to begger nations in the EZ & EU.

  74. Steve, you are course correct. Professor Mitchell does often point out that EZ nations can and should ditch the Euro. To a certain extent they are complicit in the damage they are allowing to happen to themselves. Once you understand that it is hard to pinpoint blame on German policy alone. German policy is designed mostly to benefit Germans- which is what anyone would expect of a good national government that represented them.

    I just like to discuss history once in a while and Robert H is knowledgeable and seems to enjoy it also. But you are right that I shouldn’t get too far off the track.

  75. Jerry,
    Check out BoardGameGeek as a site to discuss history. See the Wargames page, either General or Historical Context.
    Also, the Religion Sex and Politics, aka RSP, page were you can push MMT.

  76. Thanks Jerry.
    You wrote, “Steve, you are course correct. Professor Mitchell does often point out that EZ nations can and should ditch the Euro. To a certain extent they are complicit in the damage they are allowing to happen to themselves. Once you understand that it is hard to pinpoint blame on German policy alone. German policy is designed mostly to benefit Germans- which is what anyone would expect of a good national government that represented them.”

    You are, of course, correct; if you see Germany as a ‘nation’.
    However, the EU was sold to the voters as being about cooperation and unity that would bring ‘prosperity’.
    If a state in the US was doing this to other states, it would be a scandal. At least in the US the US Gov. spends much more in the poor states than the rich states. The rich states’ Senators can’t block this process. Germany can and does.

  77. Well you are right Steve. There is a huge federal government for the United States that transfers money all around the states and not anything very similar for the EU or Eurozone. That is a big part of the problem there.

    Germany is a nation. Italy is a nation. Spain is a nation. The United States of America is a nation. The State of New York is most definitely not a nation- it is a part- an important part- of the country called the USA.

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