GH: The bit missing from the discussion on MMT is that no-one is obliged to take anyone else’s money. Money is a claim on resources but it is not a legal claim on anyone in particular. That means its utility depends entirely on a general confidence that other people will accept it in return for the things I want to buy. Inflation is no more than an erosion of that confidence so that money exchanges on worse and worse terms. In a Zimbabwe style hyperinflation the confidence fails completely and money becomes worthless. Governments can issue as much money as they like but if the amount of money they issue far exceeds the value of the goods and services it can buy, confidence begins to erode. That might sound theoretical but it acts as a limit on the issuance that governments can make.
The practical difficulty is that governments do not know how much money is too much. They have only a vague idea of the supply potential of the economy at any time and an even vaguer notion of whether private people and companies will want to spend stocks of money they may be holding. Moreover while they control their own direct issuance via expenditure they have only weak control of secondary money creation by commercial banks.
MMT is not wrong but it doesn’t get us much further because it does not address the practical difficulties. Note that monetary gifting is subject to similar uncertainties; the central authority would always be unsure how much it could safely gift.
Me: “Moreover while they control their own direct issuance via expenditure they have only weak control of secondary money creation by commercial banks.”
Not if we create a truly national non-profit banking, financial and monetary system based on and fully aligned with Monetary Gifting which private banking cannot compete against seeings how they require profit, interest and clients willing to pay far more than what they would need to pay from the new national system.
“Note that monetary gifting is subject to similar uncertainties; the central authority would always be unsure how much it could safely gift.”
In the consumer economy it would be 50% of whatever was purchased by the consumer. That’s a nice empirical figure. Fiscally, if it ought to be whatever makes the economy more internally integrated, self sufficient and thus robust and independent from any coercion from import platforms like China. In the mean time I doubt China would refuse our currency as it is still the largest consumer economy on the planet and thus their major importer, and if they try anti-social inflation of their prices you just slap a 100% tariff on the increase. Meanwhile, as the cost decreasing effect of Monetary Gifting’s policies are implemented we become competitive with them. And as we wouldn’t have to worry about unemployment, individual monetary scarcity or inflation, re-industrializing in the most efficient and ecologically sane way possible would be the obvious thing to do…no matter whether China or anyone else liked it or not.
MMT, Keen’s Minsky Financial Instability Hypothesis and Hudson’s Financial Parasitism are all good research. They just need the policies of Monetary Gifting to complete the paradigm change.