Bloomberg has offered another piece on Modern Monetary Theory (MMT).
This one is more complimentary and quite reasonably compares MMT with the seventeenth century scrip issue of
Anyway the article is broadly approving until the problem in the final paragraph:
Which brings us to today. MMT might work, but its success would ultimately depend on a willingness to destroy money via taxation, and not just create money by spending. And there is little to suggest that Congress, left to its own devices, would ever pursue that path with the kind of consistency that their Puritan forbears displayed.
MMT is of course actually a description of what IS working now. Albeit the banks have either deceived governments into not pulling on the levers available to them or those governments have been over willing dupes for a ‘There Is No Alternative’ agenda. But the article still seems to suggest that today’s ‘independent’ central bankers have done a far better job than governments, which, as governments bailed out the banks, is definitely another version of ‘fake news’.
Even Rob Macquarie, an economist with Positive Money, seems to damn MMT with feint praise in his article for Open Democracy. He states that MMT holds that money was a creature of the state (though surely it was actually Keynes who suggested money was a state monopoly?)
From an MMT perspective, tax ‘destroys’ money by taking it out of the economy. Changes to taxation levels are thus the preferred policy lever with which to manage demand and control inflation. However, taxation also serves many other purposes, which it would be naïve to think will always align neatly with controlling inflation.
Now, we know that the Bank of England quarterly bulletin said that Private Banks create money out of thin air. Since they all create it and then destroy it under a government issued banking licence, I find it very difficult to believe that the government itself would act differently. Why would or should it? So tax destroys money. Full Stop.
I agree that “Tax will never align neatly with controlling inflation”, but I suggest that that is nothing new and Richard Murphy has outlined some (extra) purposes for tax. It is a messy and ill-defined business but with the right intentions not overly difficult.
Yet Rob Macquarie says:
A Green New Deal platform would be more credible, and more likely to succeed, with a plan to map and leverage the power of private investment flows.
Why more credible? Private finance has not covered itself in glory of late has it?
And he adds:
However, central banks are rightly cautious over the financial risks.
So the planet can go fry because the central banks are rightly cautious?
The title of the piece ‘Of course we can pay for a Green New Deal, but we can’t escape hard choices’ summarises what seems to be an obsession with inflation rather than planetary meltdown.
I know Positive Money want to become a think-tank. So perhaps that is why Positive Money have also launched a new website “The Money Question” – yet, oh dear, there seems no easy way of contributing to it…