Thursday, May 31, 2012

The source of the MMT delusion: The fiat funny money system does not quite mimic commodity money

It’s quite pointless to argue with MMTers.  I’ve been challenging them for months now over at the Mike Norman site and there truly is no there there.

The entire fantasy world of MMT starts with the insight of Stephanie Kelton that perhaps the world of fiat funny-money creation does not completely mimic the real world of commodity money.

Since the “money” received by the state in taxes and from bond sales might not be exactly the same “money” “spent” by the government and since the accounts generally do not match up, the MMTers take a flying leap off the cliff and conclude that the government need not tax or sell bonds at all in order to “spend”. Ever. (The purpose of taxes is simply to suck funny money out of the system and control price inflation). And therefore, the government is not revenue constrained and the government can just “spend” and “spend” on SS and $100 trillion worth of adult diaper changing services without any concern for the source of those funds BECAUSE THE GOVERNMENT CREATES DOLLARS AND HAS AN UNLIMITED SUPPLY. The only “constraint” possible is price inflation, but that’s easily controlled and only fools worry about that. Further, the underlying theoretical foundation of MMT is just the nitwit Keynesian jargon and categories of “thought”. Thus, they conclude that “demand” can easily be fixed because the government has an unlimited supply of funny money dollars to “spend”. That’s MMT. That’s it. There is nothing more to it.

They have no familiarity with or understanding of even basic Austrian concepts such as economic calculation, ignorance and human exchange. They don’t know and they don’t care. They ain’t worth the powder. In fact, they do us all a favor whenever they start their blabbing because it helps the public understand what an outrageous monetary system we have. Further, the American public does not believe that government spending causes prosperity and they should be the target of our concerns and outreach.


  1. This comment has been removed by a blog administrator.

  2. What is "commodity money" and how does it differ from normal commodities?
    Is a gold standard, such as existed prior '72, a form of commodity money?

  3. I would call a system where people contractually determined what money would be used in their transactions to be a "commodity money" system. Prior to 1971, the US was on a strange "gold exchange" standard where average people were prohibited from owning gold pursuant to unconstitutional statutes. Those two system are different, right? You list the ways.

  4. Part of the prescriptive core of MMT describes the operations of a floating rate sovereign currency, which includes the vast majority of those national currencies in existence.
    Most of this description is basic accounting and is true by definition, being internally consistent.
    Non of the objections to MMT have been able to demonstrate an error in the accounting.

    Most objections concern the nature of existing monetary arrangements and whether or not the MMT description of floating rate sovereign currencies is accurate.
    That most currencies are floating rate is undeniable, that MMT describes this has yet to be demonstrated false, nor has anyone provided a correct alternative.

    All evidence, legal, regulatory, etc, indicates that MMT does accurately describe current monetary arrangements.

    Any explanation of the money system must explain the operations of a floating rate regime and how it differs from a fixed rate.

    Any theory of money that cannot account for the operations of a floating rate currency is utterly useless in a world of floating rate currencies.

    I have yet to hear any Austrian describe how a floating rate currency differs from a fixed, or even that such a distinction exists.
    Austrians need to provide details, & yes this includes the accounting, on 1) how they believe the current monetary system operates, 2) given current arrangements what policies to they advocate & 3) what in the end do they want, the policies, institutions, etc.

    1. The MMT "accounting" process does not account for much. Like voluntary transactions and their terms. Or $220 trillion in unfunded adult diaper changing services for baby boomers.

      And that "new net financial assets" crap is just a Cantillon Effect of squirting of stolen purchasing power to the new recipients. And you guys think you are just SO DEEP.

      When MMTers claim that the government's deficit is the private sector's surplus, there are 2 scenarios.

      The first is when the deficit is all borrowed debt. Some part of the private sector owes all that debt to another part of the private sector. So, contrary to your insinuations, there is NO free lunch there. And no accounting for who in the private sector actually owes the debt or to whom.

      The second scenario is when the government just spends money into existence in excess of tax receipts (which at present it DOES NOT DO). The recipients of the new funny are receiving purchasing power from those holding the existing money. There is only a free lunch for the recipient but an equal loss for the victim. And MMT makes no accounting for it.

      MMT is a scam.

      Further, the Austrian School has analyzed the nefarious effects of fiat funny money until we’re blue in the face. But facts and analysis are just like water rolling off a duck’s back to an MMTer.