so while i’ve never dived into it, the superficial explanations of mmt are superficially compelling.
i do not understand what relationship if any it has with prior left/communist ideas. and mmt seems not to be interested in such relationships.
is this in the dunk tank because mmt? or because capitalist trying to explain why mmt is wrong?
The dunk here is not on MMT, it’s that the head of Biden’s council of economic advisors opposes MMT but can’t even try to muster a reason why. The woman interviewing him in the video is Stephanie Kelton, author of the Deficit Myth and the main proponent of MMT. She describes (as shouldn’t be shocking based on the name of her book) that deficit spending is actually a necessary good to keep the economy functioning, and in that way fits within the left as a counterpoint to criticism of progressive policies like universal healthcare or free college or reparations etc. as “unaffordable.”
But your instinct is right, MMT isn’t necessarily collaborative with leftist ideas since it isn’t concerned with class or redistributive policies. It’s basically just a way to explain why we can print so much money and see barely any inflation despite classical economics constantly warning about that exact scenario.
It’s mostly that he clearly doesn’t understand how this works even though he’s in charge of the policy. Conceptually, mmt works because the government can just keep issuing as much currency as it wants. So, as long as the spending is done in its own currency there isn’t a problem. However, the whole thing is built on trust in the system and if people stop losing faith in the value of the currency then the whole house of cards comes crashing down.
It’s not built on faith but in authority. The reason the US can infinitely print money is because the dollar is the international reserve currency and the US imposed the dollar as the international reserve currency with military might.
Imagine there exist 100 dollars in the entire world. 50 dollars are in the US and the other 50 are in the rest of the world, the US has 50% and the rest of the world the other 50%. The US decides to print 25 dollars, now the world supply of dollars goes to 125. Now the US has 75 dollars and the rest of the world have 50 dollars, the US has 60% and the rest of the world has 40%. The value of each dollar goes down proportionally to the increase but guess what, the US doesn’t feel the impact because it now has a bigger share of the money supply. Now add in that the demand in dollars is always increasing because international trade is always growing, unfortunately the value of the dollar is tied to the growth of international trade.
This is why dedollarization is an existential threat to the US, being able to print dollars infinitely and export the inflation has been their free lunch since WW2. When countries stop using the dollar for international trade, the dollar stops strengthening proportionally to the trade of said country, and when that happens the US finally feels the consequences of printing money.
The Deficit Myth uses a different reasoning that’s more widely applicable to fiat currencies. Fiat currencies have value, are used in commerce, because you have to pay your taxes in them. You can’t pay with Bitcoin, real estate, or commodities.
Inflation on the other hand is caused by basic supply and demand. Inflation happens when more people want to buy a good than is in supply. The most recent inflation in the US was caused by supply shocks due to covid and eventually the war in Ukraine. Because so much of our economy is monopolized, a few players were able to artificially raise their prices using the real inflation as a smoke screen.
Hypothetically a treasury could print, or swap some numbers in a spreadsheet, as much money as they wanted into existence and no inflation would occur. Assuming everyone was able to buy what they wanted at a fixed price.
what relationship if any it has with prior left/communist ideas
I have heard others say - but haven’t looked into it myself yet - that Stalin implemented in part of sort of proto-MMT and that was a contributor to the USSR’s breakneck growth. That is until Khrushchev got all panicky about Soviet debt levels (even though he shouldn’t have) and focused on trying to lower debt.
One area in which MMT intersects with socialism is more that MMT really explains well how money works. And until a socialist country eliminates the money form - and we’re a long ways off from that - theories of money will be useful.
Steve Grumbine is an MMT guy who has a good podcast, “Macro and Cheese”. I don’t want to put words in Steve’s mouth and say he’s a Marxist, but he talks about Marx all the time, has clearly read some of his works, and frequently has Marxian economists / thinkers like Michael Hudson and C Derek Varn on.
And does anybody know where to start if I wanted to dive in? (even if it’s just to argue with an annoying friend at Goldman?)
Second Thought: Why The Government Has Infinite Money. As usual his links in the description are also very good.
ETA: I haven’t seen the new film I referred to in another comment yet, but I’m hopeful that it’s good as well. It may not have the Marxist angle that Second Thought brings, though; we’ll see.
I was right: it spent about 90 seconds on class analysis. For the amount of footage filmed at UMKC, you’d think they’d have stopped by Michael Hudson’s office, but I guess interviewing a Marxian economist would be a bridge too far for normies. Still it was well made and worth a watch.
I found a YouTube link in your comment. Here are links to the same video on alternative frontends that protect your privacy:
The Youtube channel 1Dime has a great intro video that has a lot of sources, but Stephanie Kelton’s book The Deficit Myth is generally the most talked about as an intro to the topic.
The primary thing to understand is that MMT isn’t fundamentally a policy or policies, but rather is an explanation of the underlying mechanisms of currency. So in that sense, it’s applicable to a socialist economy that still has currency because, it explains how currency is functioning in the political economy.
In that sense it’s not that different than state ownership of the means of production. The state can own that and it’s still not socialism if the ruling class is an aristocracy or oligarchy or despot instead of the working class. It’s just a tool. That’s why the best retort to liberals poo-pooing MMT is to point out that the state already accepts MMT every time it passes a military budget.
