I have followed Billy Mitchell and posted to his blog for some time now. MMT definitely has the mechanics of money creation correct and that is an important MONETARY insight. It’s only problem is….it still does not perceive and so penetrate to the essence of the ongoing ECONOMIC problem which is that the economic system continually, and with innovation and AI will increasingly create, a scarcity ratio between total individual incomes and total costs, and so total prices. The realization of this dynamically ongoing problematic micro-economic fact is the key understanding necessary to enlighten macro-economic theory as to the monetary policies that will resolve it, namely direct and reciprocal monetary Gifting. Why Gifting? Because it is the only way to rectify the above income, cost and price ratio….without increasing costs in an already inherently cost inflationary economy.
Now, does that mean that we should Gift individuals and businesses with what is guessed at to be a mere statistical equilibrium of the above problematic ratio? No. Why? Because that belief still has the stench of general equilibrium theory clinging to it and general equilibrium has been almost entirely de-bunked by the brilliant Steve Keen. Also, a statistical equilibrium is a momentary one and is a full stop in that sense. We want the economy to be in a continual, graceful state of free flowingness. And in order to accomplish that you have to invert the problematic ratio above and so make it an abundance ratio of individual incomes to costs/prices. This is Wisdomics. This is “the higher disequilibrium” that enables individual freedom, frees enterprise from an austere and unnecessarily onerous integration of the money system and economy and so creates a free flowing economic system.
In an ironic sense you have to take Smith’s no longer valid “Invisible Hand” and make it concrete so that monetarily and economically it can grasp the policies that will resolve the current most basic instability of the system.
c copyright 04/27/2017
JB: I disagree, Steve.
Not about the wealth and income gap CREATED by debt-based money, but on MMT’s basic money construct – it’s totally wrong – and also on the viability of a solution that is a wealth-policy gap-filler, rather than a systemic replacement of that debt-based cause for growing the gap in the first place. Gotta have a new kind of money.
Me: Well that’s just it, monetary Gifting IS both a new kind of money and a new monetary paradigm. And the problematic gap is between individual incomes and costs/prices not wealth/production. The abundant policies of Wisdomics link effective demand/individual incomes to cost/prices in a way that there is no longer any problem or possibility of monetary inflation. In other words the discount policy is linked to and only takes effect at actual sales of production, thus there is no longer any MACRO-ECONOMIC inflationary problem, especially when you make the discount percentage high enough to integrate the seeming impossible into the economy, i.e. price deflation. And yet it fits within profit making systems because the businesses discounts to consumers are rebated back to them. And over production may indeed be a micro-economic problem for a business that foolishly decides to over produce, but that’s just their problem to correct….not a macro-economic phenomenon…..for everyone.
MMT is not an economic solution, but you do have to give it its due so far as the mechanics of money creation.
JR: Steve, whether it is by accident or design, and I believe it is the latter, Modern Monetary Theory (MMT) is a counter to the two most important claims of monetary reformers.
It tries to show that borrowing is sovereign issue of money and it suggests that debt “doesn’t matter”. From the former, it tries to pretend that governments are “the monopoly issuers” of money, without quoting data for one single nation where this is the case.
It seems to be trying to counter the growing realisation that actually banks have the monopoly of money creation by pretending that debt is not important, when this is the major means by which financial institutions can control policy and thus rule nations from behind the scenes.
JH: Thanks, Steve for being my radio guest. I’ll send the link when the program is posted.
Me: Thanks Jim. I thoroughly enjoyed it. Looking forward to how much different I sound than what it seems like when I hear myself talk. 🙂
From the article Billy Mitchell correctly describes the creation of nearly all of our money which is the private banks. That is why I said they had the mechanics correct. If MMTers think that the government creates our money they obviously need to disabuse themselves of that. I think MMT’s primary beef is with the economists and politicans who still think that banks loan deposits, and there are still way too many of them out there (like the tea party/”freedom” caucus in America as well as libertarian and Austrian advocates like Rand Paul.
As for debt not mattering, that is also errant. MMTers do however understand that the government is not like a household in that it could, if it actually did create our money, technically never go bankrupt. My primary problem with MMT is that it still thoroughly remains within the paradigm of Debt. And Mitchell has recently posted several blog posts running down the idea of a basic income/dividend preferring instead to advocate for “job guarantee” hence he still is tied to socialism’s obsession with employment as a solution. They are either not aware of the paradigm of monetary Gifting and its necessity, or dismiss it. Both are old paradigm “thinking”. No one is against employment, and it undoubtedly has a long way to go yet, but, as I’m sure you would agree, “full employment” will never resolve the economy’s basic problem.