Having recently submitted my twopennworth to Positive Money’s (PoMo) discussion on Richard Murphy’s new free to download book ‘Money for Nothing -and my Tweets for Free’, it is interesting to discover that the vast majority of PoMo commentators are now on board with Modern Monetary Theory (MMT).
The naysayers seem to mostly hail from the US and favour ‘Sovereign Money Creation’, where as I understand it, they believe that, although all tax is recycled, governments still have the power to create money – but that this power should be devolved to a power other than government, presumably on the grounds that governments can fall prey to PPE scandals…
Yes but, Parliament should be preventing that! The fact that it hasn’t is a Parliamentary failure, but appalling as it is, taking that power outside Parliament to whichever quango you choose does not in itself prevent the problem – indeed quangos being smaller and more private than Parliament, may more usually serve to increase it.
Worse still, it deprives governments of their power to get stuff done, because spending money is how they do it. What if the quango, like the computer, says no? We would be back to thinking that government money grew not out of thin air, or on trees, but on rich people, who would need taxing.
Sovereign money creation thus enables more power to be surrendered to the wealthy – which is the last thing we need,
Because of this (what I regard as) confused thinking many seem to think MMT actually provides a way of economic forecasting. It is not of course a crystal ball but can and should be used in whichever economic crystal ball you are peering into. Likewise there is the misconception that MMT suggests policies. Whereas of itself, it suggests none but it can and should be used in the creation of them. As, without a penny in extra tax being raised, the wrong policies of the PPE scandal have so clearly, unfortunately, shown us, that it can be.
Then there is the idea that the reasonable response to ‘The Deficit Myth’ is “Thanks Stephanie, but so what?” whereas I consider that a much more logical response is why we are told that we tax first and then spend when in fact enshrined in UK legislation – and indeed in general logic, we can see, as matter of fact, that governments spend first and tax afterwards.
That is the power of government – or as Stephanie Kelton would put it ‘the power of the public purse’.
We really don’t want to relinquish it to any Bank of England sub committee…
The PoMo old school are entitled to favour a different monetary system of course – but I shall certainly not be supporting their zeal when those reforms serve to bake in faults that make the system much worse than the current one.