Marxists getting all tied up on MMT

Its Wednesday and so only a discursive type blog post (that is, very little actual research to report). I have been thinking about the so-called Marxist-inspired critiques of Modern Monetary Theory (MMT) and just the other day another one popped up in the form of the long article by Paul Mason. One of the things that I have noted about these critiques is that they deploy the same sort of attack against MMT that mainstream economics has traditionally deployed against Marxist economics. One would think they would at least be consistent. It won’t take me all that long to explain that.

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The austerity attack on British local government – Part 1

On Sunday, May 12, 2019, I will be presenting a workshop in London on – Local Government Funding: Challenging the Status Quo. Basically, I will be speaking about the way in which flawed understandings of the capacities of currency-issuing governments, combined with a vicious, ideological attack on working people from a government fully invested in neoliberal transfers to the elites, have ravaged the capacity of local government in the UK to deliver essential public services. See the Events Page for more details. It is a public event and I hope people support it. To prepare for that workshop, I have been digging deeply into the data to fully acquaint myself with how the ideological austerity push has been distributed across central and local government service delivery. It is no easy task. The data is a ‘dog’s breakfast’ and coming to summary positions is quite time consuming. There are also nuances in the way local government is structured (particularly since the Thatcher years where devolution and cost-shifting was accelerated), which mean that care must be taken in making sensible comparisons. Here are some of the things I found. I have learned a lot in this process, which is a good thing. This is Part 1 of a two-part series.

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The Weekend Quiz – April 27-28, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Eurozone horror story continues

Eurostat released the latest fiscal data for 2018 on Tuesday (April 23, 2019) which showed that – Euro area government deficit at 0.5% and EU28 at 0.6% of GDP – apparently a cause for celebration if you can believe the news reports that have accompanied the data release. The problem is that these numbers are meaningless without a context. And a relevant context is how well the monetary system is accommodating the advancement of material well-being among the citizens of Europe. On that ‘functional’ criterion, the horror story, more or less continues. Data relating to the real world (as opposed to the world of fiscal numbers on bits of paper) tell us that the damage from the GFC interacting with a dysfunctional monetary system design still lingers and the 19 Member States are still highly vulnerable to the next crisis. The austerity mindset remains and these fiscal outcomes indicate a failure of policy. Nothing to celebrate at all.

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Ridiculous MMT critiques distorting Scottish independence debate

In a few weeks I am off to Britain again to participate in a series of events. Two of these events will be in Scotland where we (Warren and I) will discuss, as outsiders, issues pertaining to the monetary arrangements that might accompany a move to Scottish independence. It is a controversial issue in itself, but, unfortunately, is also intertwined with the vexed issue of EU membership. And the complication then becomes that progressives, who might otherwise be attracted to the Modern Monetary Theory (MMT) way of understanding the monetary system, also exhibit the standard misconstrued Europhile view that the EU, neoliberal though it is, can be reformed and that an independent Scotland should be part of that mess. And, in doing so, they then take problematic positions on the currency question. So a sort of ‘nest of vipers’ sort of situation, from the Aesop’s fable – The Farmer and the Viper. As in the Fable, the Europhiles embrace of the EU will always pay them back in grief. Anyway, while I am always cautious discussing the pro and con of situations where I have no direct material stake and a less than full understanding of specific cultural and historical influences that are at work, the Scottish question is interesting and demonstrates many of points that nations should be cogniscant of when discussing monetary sovereignty. And besides I have to get up in Edinburgh and Glasgow in a few weeks so as a researcher I am trained to be prepared and seek the best understanding that I can of the complexity of the situation. I will be writing a few posts on the Scottish issue as I prepare for that speaking tour.

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The Weekend Quiz – April 20-21, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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When the MMT critics jump the shark

I was sent two papers by Thomas Palley the other day. I have known him for decades. He continually disappoints. He has become one of those self-styled Post Keynesians who are trying to destroy the credibility of Modern Monetary Theory (MMT) for reasons that are not entirely clear although I know things I won’t write here. He thinks that if he drops a reference to Michał Kalecki, the Polish Marxist economist, into a paper, it qualifies one as being Post Keynesian. But, the reality is that his work (what limited academic work that he has published) sits squarely in the Neoclassical IS-LM synthesis tradition, which is not Post Keynesian nor heterodox at all. It is the antithesis of Post Keynesian. So I have never understood how he wants to appear Post Keynesian. Anyway whatever the answer to that little puzzle is, he definitely has a set on MMT and regularly recycles the same sorts of attacks, which, continue to have the same problems. In other words, he does not seem to (or does not want to) learn. He also accuses those who respond of dishonesty – playing the pure is me card – although his own work on MMT fails, in part, because he deliberately (or not) refuses to acknowledge the extant MMT literature, which addresses the issues he claims are missing in the MMT approach. Go figure!

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The Europhile dreamers are out in force

It appears that the Brexit process in Britain will now stall. My understanding of the Referendum was the majority of British people who voted wanted to leave the EU and that the politicians from all sides of politics unambiguously stated they would honour the outcome, whichever way the vote fell. That is what democracies are about. A lot of people are disappointed by vote outcomes. They have to grin and bear it. But in the case of the Brexit vote, the Remainers have never accepted the outcome and have used various means – foul or otherwise – to undermine the choice of the majority. There have been regional strains involved and social class strains (cosmopolitans and the rest) involved. There have been nasty imputations that those who voted to Leave were ignorant, racist or otherwise not entitled to cast an opinion. The Europhile Left had conniptions because their dream looked like evaporating. I use the term ‘dream’ deliberately – as in, not ground in reality. As the incompetence of the Tory government in managing the exit process reaches new heights – embarrassing heights – the Europhile Left has become emboldened and are now reasserting their claims that the British Labour Party should articulate a clear Remain position and push to reform the prevailing European treaties, which embed neoliberalism in their core. Talk about dreaming.

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The Weekend Quiz – April 13-14, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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ECB denial is just embarrassing

I was asked by an Austrian friend the other day if I could provide some questions to a journalist friend of theirs (András Szigètvari from Der Standard) in who was about to interview Sabine Lautenschläger who is Member of the Executive Board of the ECB and former Vice-President of the Bundesbank. I dutifully complied and the – Interview with Der Standard – was published on April 1, 2019. April 1 is known as April Fools’ Day, a tradition that spans continents and culture. In Germany, apparently, April 1 is a day where ridiculous stories are told at the expense of the listener, to elicit uproarious laughter (so-called “Aprilscherz”) (Source). I won’t be as unkind to assert that Ms Lautenschläger was acting out the tradition even though what she was saying could easily be mistaken for a planned ruse. Perhaps the joke was on her!

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The German undervaluation obsession is resistant to ‘reform’

Martin Höpner, who works at the Max-Planck Institute for the Study of Societies in Cologne, recently sent me a copy of his latest paper – The German Undervaluation Regime under Bretton Woods: How Germany Became the Nightmare of the World Economy (published January 2019). He presented this research at a Makroskop workshop in Wurzburg on October 13, 2018 – I was on the same panel as him at that workshop and enjoyed some very productive conversation about these issues. It is a very interesting historical analysis of the way that the German elites (central bank, industry groups, banks, politicians, and trade unions) have collaborated since the 1950s to suppress domestic consumption and maintain the nation’s export competitiveness, even though this has undermined material prosperity for workers. The relevance of the analysis to current debates about the Eurozone and its capacity for reform are that the undervaluation regime is entrenched in Germany’s institutions, its history, its culture, and its power elites and have been that way for many decades. What the Europhile progressives, who still think reform is possible, have to show is that this entrenched position can somehow be abandoned. They have never provided any convincing argument to substantiate that hope/belief. That is why I continue to call them out as dreamers – good intentions but naive to history.

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The mainstream old guard tell it as it is – and how different that is to MMT

While many mainstream economists have been coming out to defend their reputations against the growing awareness that Modern Monetary Theory (MMT) presents a direct challenge to their hegemony, some of the mainstream haven’t responded at all and continue to confirm what the standard mainstream macroeconomics is about and how far removed from MMT it really is. The MMT critics claim that there is nothing new in MMT (‘we knew it all along’) in one breathe, and then ‘MMT is crazy dangerous’ in another, without seemingly realising how conflicted that juxtaposition is. But when leading mainstreamers, who are not engaging with the public MMT discussion going on, publish their Op Ed pieces, we gain an insight into what the mainstream is really about despite all the attempts by other mainstreamers to co-opt as much of MMT as they can while still claiming it is crazy. A recent Op Ed article in the Wall Street Journal (March 20, 2019) – The Debt Crisis Is Coming Soon – by Harvard economics professor Martin Feldstein – is a great demonstration of the DNA of mainstream macroeconomics. MMT presents a diametrically opposed view to this standard mainstream analysis. There is no correspondence possible between the two positions.

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The Weekend Quiz – March 23-24, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Fake surveys and Groupthink in the economics profession

In recent weeks, it has become apparent that Modern Monetary Theory (MMT) has evolved into a new ‘status’. Our work is everywhere now and has penetrated the political process (particularly in the US). At the same time, the mainstream macroeconomists continue to make fools of themselves by backtracking on some of their predictions that were made early in the GFC (about inflation, solvency, interest rates, bond yields, etc) and attacking MMT economists who actually provided correct analysis of what would happen in terms of these aggregates. The new ‘status’ means that MMT is now a visible challenger and the old guard hate that. All manner of critiques are emerging and the heartland of the mainstream approach at the University of Chicago recently trumped up a survey as evidence that MMT is crazy stupid. Some of the more odious mainstreamers then chose to disseminate the survey results as a sort of glorious statement of victory over MMT. The only problem was that the survey had nothing to do with the body of work we refer to as MMT and so was a dishonest exercise. The other problem was that the survey respondents were too insular (I didn’t say stupid) to realise they were being duped by Chicago Booth. None commented that the two questions that were under the heading ‘Modern Monetary Theory’ bore no resemblance to any core MMT statements or learnings. All this told me was that Groupthink is crippling the economics profession.

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The Weekend Quiz – March 16-17, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Another fictional characterisation of MMT finishes in total confusion

I am travelling across Europe today and so am just writing this in between various commitments. I will soon be back home in Australia and have received a lot of E-mails about the way the Australian media has been treating the recent upsurge in attention about Modern Monetary Theory (MMT). The short description is appalling – one-sided, no balance and hardly about MMT at all, despite dismissing our work as garbage. So par for the course really. While most of the articles have just been syndicated hashes of the foreign criticisms that have been published elsewhere from Krugman, Rogoff, Summers and others. But there was one article by a local journalist who tried to predict which side of history would end up looking good in all this and chose, wrongly I think, to throw his cap in with the New Keynesians. More alarmingly though is that this local effort clearly followed the international trend by setting out a fiction and then tearing into that fiction claiming to his readers that this was about MMT. He missed the mark and ended up totally confusing himself. So par for the course.

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Britain’s austerity costs are larger than any predicted Brexit losses

On February 21, 2019, the British Office of National Statistics (ONS) released the latest fiscal data for the British government – Public sector finances, UK: January 2019. There was a lot of press reaction applauding the result and even progressive writers found it possible to misrepresent what the data actually is telling us has been happening. The fact that the British government recorded a fiscal surplus of £14.9 billion in January 2019 was touted in terms of creating a ‘war chest’ that the Government will be able to delve into when the next crisis arrives (which might be soon if the current Brexit mishaps continue). The reality, is, of course, totally different. There is no stored up spending capacity (stock) created when a government runs a surplus. What is actually happening is that the net flows out of the economy to the government squeeze an already over-indebted non-government sector for liquidity and destroy that much of its wealth portfolio. Moreover, while all and sundry, including the Euro-leaning Left are frothing at the mouth over Brexit, new data now allows us to compute the losses arising from the deliberate strategy of fiscal austerity that the Government has pursued. Guess what? They appear to dwarf all the Project Fear estimates of losses arising from Brexit (notwithstanding the flaky nature of those estimates). Where is the Guardian’s column Austerity Watch to match its hapless Brexit Watch column? Where is the relentless stream of articles from Guardian journalists and Op Writers about austerity? Sorry, that would take up space which is occupied by the relentless stream of articles about Brexit?

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The Weekend Quiz – March 2-3, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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The NAIRU/Output gap scam reprise

It is Wednesday and despite being on the other side of the Planet than usual (in Helsinki at present) I am still not intending to write a detailed blog post today. I am quite busy here – teaching MMT to graduate students and other things. But I wanted to follow up on a few details I didn’t have time to write about yesterday concerning the role that NAIRU estimates play in maintaining the ideological dominance of neoliberalism. And some more details about the Textbook launch in London on Friday, and then some beautiful music, as is my practice (these days) on Wednesdays. As you will see, my ‘short’ blog post didn’t quite turn out that way. Such is the tendency of an inveterate writer.

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The NAIRU/Output gap scam

There is a campaign on the Internet calling itself CANOO (the Campaign against nonsense output gaps) which one Robin Brooks, economist at the Institute of International Finance and former Goldman Sachs and IMF employee, is pursuing. You cannot easily access his written memos on this because the IIF forces you to pay for them. However, there is nothing novel about his claims and the points he is making are well-known. However, they are points that are worthwhile repeating at loud volume because the implications of the ‘nonsense’ are devastating to the well-being of workers, particularly those most vulnerable to precarious work and unemployment. So while the CANOO is just dredging up old issues I am very glad that it is. The concept of biased estimates of output gaps and so-called ‘full employment unemployment rates’ goes to the heart of the way the neoliberal economists, who dominate policy making units in government and places like the IMF, the OECD and the European Commission, create technical smokescreens to justify their dirty work. The more people find out about the basis of the scam the better. I have been working on this issue (estimating, writing and publishing) since the late 1970s as a graduate student. So welcome Robin Brooks, and make a lot of noise.

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