Talk about “the economy” dominates political discussion today. Many policies and decisions made by political leaders are justified by the claim they are good for the economy or not good for the economy. Modern Money Theory is important because it challenges the assumptions which lie behind these policies. Its advocates insist that most economics professionals and politicians do not really understand how the economy works and what is good or bad for the economy. At the centre of this debate is the policy known as austerity and the justification given for it.
Professional economists and economics advisers used by politicians insist that what is best for the economy is for the federal government to generate a surplus by cutting expenditure so that more income is derived from taxes than it spends. They also insist that cutting taxes stimulates the economy since businesses have more money to hire workers and invest. The economic theory which lies behind these policies is known as neo-liberalism or the Washington consensus. Over the last 50 years it has come to replace all other views about the economy.
WHAT IS NEO-LIBERALISM?
Neo-liberalism is an economic theory. Most people, including myself, don't know much about economics. It is just a lot of unfamiliar words, big numbers and odd looking charts. However, two of the basic ideas behind neo-liberal economics are not only easy to understand, they are also taken to be an obvious part of common sense.
The first is that money is special pieces of coloured paper or plastic and special bits of metal called coins. Money is fundamentally cash we can put in our wallets and use to buy what we want. The second is that the way a federal government operates is like our own household. It has a source of money, or income, from taxes and it spends this money according to the policies determined by the government.
This household view of the economy helps us to understand the fundamental differences between the modern day left and right. The right, seen as greedy by the left, say that what governments do is take their hard-earned tax dollars and give them to people who have not worked for them. Their money is given to unemployed, the elderly, and used to subsidise health care and rent. The left, seen as do-gooders by the right, say that they are happy for the government to give some of their tax dollars to others in need. So when they argue over taxes and expenditure they argue over who gets taxed, how much they get taxed, and where the tax dollars should go. The key point is that both left and right accept the neo-liberal theory that a surplus is good for the economy.
These days the right keeps reminding the left that in the national economy, if the income is less than the expenditure then the government is in debt and this is bad for the economy. In fact they insist that the government should achieve a surplus, so there is more coming in from taxes than goes out in expenditure. This pressure to cut expenses and “live within our means” is known as austerity and we have been suffering from this for years.
HOW IS MODERN MONEY THEORY DIFFERENT?
First MMT says that seen as a theory about how the economy works neo-liberalism fails. Even many economists now agree that neo-liberalism doesn't seem to describe how the economy works. If neo-liberal economists were seen as car mechanics, nobody would take automobiles to them for repair. Second MMT says that the two assumptions explained above are both false.
MMT is called Modern Money Theory for a reason. 200 years ago money was either pieces of gold or silver or it was special pieces of paper – bank notes – that could be exchanged for gold or silver. Later virtually everyone came to use money as special pieces of paper or coins called cash. However two things have changed in the last 50 years. The first change is that most money around the world has become what is called fiat money. This means that it cannot be exchanged for gold or silver. President Richard Nixon made that decision in 1971 for the USA, and most – like Australia - have followed. The second change comes from the introduction of computers into banking. Now most money consists of computer files consisting of '0's and '1's which appear on computer screens as numbers. In the USA they look like '$10.00'. In Australia they look like 'A$10.00'. In the UK they look like '₤10.00'. Fortunately some money is still in the form of notes and coin, but virtually all large financial transactions are made by typing numbers on a computer keyboard.
This means that a large amount of money is not a pile of gold, silver or notes in a bank vault somewhere. As before, however, governments authorise certain files as legal tender = money. So when the government spends money it does not take a quantity of gold or paper and give it to somebody. It increases the numbers in the file which constitutes their account. If they take money from someone in taxes they decrease the numbers in the file which constitutes their account. The amount of money the government puts into or takes out of our accounts makes a huge difference to us and for the economy as a whole. However since they are only changing numbers in a computer file, they cannot ever run out of money. They create money in the desired accounts. They don't take anything from anybody.
So the first point for MMT is that money is not a “thing” that is taken from one person in taxes and given to another. The second point is the even more unusual claim that the government is not like a household. The government creates money in its jurisdiction, but households do not. Neither do states within a jurisdiction or city councils. They must live within their means like the rest of us. Taxes paid to states or city councils consist in transfers of “money” from our accounts to theirs. When I pay a state tax, the numbers in my account get smaller and the numbers in the account of the government of South Australia get larger. Under MMT it literally makes no sense to say that a federal government must live within its means. It creates its means by “spending” it, that is by increasing the numbers in the file understood to be my account. The central political task of any government is to decide how much “money” to create and into which account the “money” is to be put. Who will get the numbers in their increased (or decreased) and how much should they be changed?
ONE FINAL POINT
MMT is a tool of analysis. It can be used to understand how the economy of a nation works. However MMT on its own does not tell us what to do. What we do with the levers that control the economy is a moral/political choice. MMT in effect revives the old idea of political economy which combines these two. Neo-liberalism has presented their economic theory as a value-free “science” totally independent of any political considerations. No doubt this is why it has produced results in the modern world many see as inhuman. It is inhuman by design. Its values hidden behind a mask of scientific objectivity. "If it is just numbers, it must be objective and not subjective like politics." Many followers of MMT happen to suggest similar policies because of the political values they bring with them. I have different values so I would use the same MMT analysis to suggest different policies. Knowing how something works is one thing. Deciding what to do with it is different. To decide what to do requires being clear about our values.
I cannot explain the entire MMT view here. Rather than attempt this impossible task I have assembled the list of sources given below which you can use to begin to understand MMT for yourself. I hope this short introduction has sparked an interest in learning more about MMT. I would encourage you to take this journey but from now on it is up to you. In what follows I have collected a range of videos, short articles, podcasts, books, research centres and people to follow on twitter. I have also included three videos on neo-liberalism understood an the hidden ideology, a powerful set of ideas which are never discussed in the mainstream media but are central to the thinking of all politicians in the West.
VIDEOS ON MMT
MMT Part 1 – The Basics
In this segment, Amanda chats with Kathleen Tramblay on Modern Monetary Theory.
MMT Part 2 of the Basics
This is the second half of our first video on MMT - Modern Monetary Theory. Amanda chats with Kathleen Tramblay on MMT.
Stephanie Kelton on the Public Purse
As part of the lecture series between UCL Institute for Innovation and Public Purpose (IIPP) and the British Library, Stephanie Kelton speaks on why a government budget should not be looked at in the same way as a household budget.
Warren Mosler: What Modern Monetary Theory Tells Us About Economic Policy
Welcome to our new video series called "New Economic Thinking." The series will feature dozens of conversations with leading economists on the most important issues facing economics and the global economy today. This episode features Warren Mosler, president of the financial services firm Valance Company and one of the founders of Modern Monetary Theory (MMT), speaking about what MMT tells us about economic policy. He explains not only what policy makers can do but also what they should do in the current economic environment. How can MMT help get the economy back on track? Watch the interview to find out!
L. Randall Wray - Modern Money Theory for Beginners
Professor L. Randall Wray, professor of economics at Bard College, discussed "Modern Money Theory for Beginners" on April 6, 2018. His current research focuses on providing a critique of orthodox monetary theory and policy, and the development of an alternative approach. He also publishes extensively in the areas of full employment policy and, more generally, fiscal policy. Wray's most recent book is Why Minsky Matters: An Introduction to the Work of a Maverick Economist (2016). Professor Wray will also talk about the Levy Economics Institute of Bard College MA and MS Programs in Economic Theory and Policy.
Moser and Kelton on Why MMT Has Not Been Embraced by Those in Power
Excerpted from "Why Governments Are Not Households" - http://youtu.be/ba8XdDqZ-Jg
Understanding MMT with Steve Grumbine
Steve was a guest on the wonderful show "The Progressive Talk!"
How Marxism and Modern Money Theory Go Hand in Hand
In this Majority Report clip, Sam Seder and Professor Richard Wolff discuss how Marxism and modern monetary theory are a match made in heaven.
How The Reserve Bank Implements Monetary Policy
Watch Senior Analyst, Katherine Leong, talk about how the Reserve Bank implements monetary policy in this short lecture-style video.
The MMT Podcast with Patricia Pino & Christian Reilly
This site contains 23 excellent podcasts covering many aspects of MMT. This is a list of those which have appeared as of July 24, 2019 and they can all be accessed at this one site.
23 Ellis Winningham: Challenging Orthodoxy (part 1)
Patricia and Christian talk to economist and activist Ellis Winningham about introducing people to MMT, the nature of money, quantity theory of money, inflation, deficit trolls, and the challenge of “paying back” government debt using time-travel.
22 Steve Grumbine: Real Progressive Economics
Patricia and Christian talk to founder of Real Progressives Steve Grumbine about his journey as a movement-builder and lead MMT activist, and the lessons he’s learned on the way.
21 Warren Mosler: The MMT Money Story (part 2)
Christian talks to father of Modern Monetary Theory Warren Mosler about student debt cancellation, Libra and cryptocurrency in general, the MMT Job Guarantee vs Universal Basic Income and the primary dealer system.
20 Warren Mosler: The MMT Money Story (part 1)
Christian talks to father of Modern Monetary Theory Warren Mosler about defining currency, the difference between government issued currency and money created through commercial bank lending, exchange rates, international trade, the petrodollar, and the NHS.
19 John T. Harvey: Macroeconomics Done Properly (part 2)
In last week’s conversation with Christian, professor of Economics John T. Harvey laid out an easy to follow, step-by-step, jargon-free way to understand macroeconomics. This week John addresses some of the pushback Modern Monetary Theory has been receiving from mainstream commentators.
18 John T. Harvey: Macroeconomics Done Properly (part 1)
Christian talks to professor of Economics John T. Harvey as he builds a solid macroeconomic framework from easy-to-follow first principles.
17 Scott Ferguson: MMT and Marxism
Patricia talks with Associate Professor of Humanities & Cultural Studies and co-host of Money On The Left podcast Scott Ferguson about Marxism and political identities in general in relation to MMT. Scott is a research scholar at the Global Institute for Sustainable Prosperity.
16 Warren Mosler: Treasuries, Kilts, Fish & Chips
If you’ve ever wondered what it’s like to go for a pint in a busy Glasgow pub with Warren Mosler, now’s your chance!
(I’ve left in the audio of the barman calling out our food orders because it made us smile!)
Around the 15 minute mark, Dr Tim Rideout enters the discussion on trade between Scotland and the rest of the UK.
15 Warren Mosler, Bill Mitchell, Patricia Pino, Chris Cook: Modern Monetary Theory and the economics of an independent Scotland
MMT founders Warren Mosler and Bill Mitchell explain in great detail what Modern Monetary Theory would mean for an independent Scotland and the UK as a whole, and Patricia talks MMT activism at a live event chaired by Chris Cook and briefly interrupted by Christian.
14 Andrés Bernal: The Green New Deal
Alexandria Ocasio-Cortez friend and advisor, Andrés Bernal talks to Patricia and Christian about MMT and the evolution of The Green New Deal.
13 Steven Hail: Everything You Always Wanted To Know About Banking, But Were Afraid To Ask
MMT economist Steven Hail helps Christian understand the intricacies of a modern money banking system as they discuss the interplay of government spending, private sector transactions, reserve and bond accounts at the central bank and how these things impact on interest rates, plus the effect of quantitative easing.
12 Fadhel Kaboub: Monetary Sovereignty, Colonialism and Independence
Patricia and Christian chat with economics professor and president of the Global Institute For Sustainable Prosperity, Fadhel Kaboub about the meaning and importance of monetary sovereignty, MMT in relation to developing countries, Venezuela, colonialism, Scottish independence, and the MMT Job Guarantee.
11 Bill Mitchell: MMT Q&A - central banking, Job Guarantee and more...
Patricia Pino and Christian Reilly talk with lead MMT academic, professor Bill Mitchell, as he answers listeners’ questions about government bond issuance, central banking, the Job Guarantee, the NAIRU, the Euro, parallel currencies, debt jubilees, zero interest rate policy, capital controls, & MMT university.
10 The Eurozone crisis: Italy vs the European Commission
In this episode Patricia Pino interviews Chiara Zoccarato, a socialist activist from Patria and Costituzione. A committed MMT advocate, Chiara explains the current stand off between Italy’s new right wing government and the European Commission, and the economic and political implications of the Eurozone spending.
9 MMT Activism, the Job Guarantee and automatic stabilisers
In their continuing mission to demystify economics, Patricia and Christian talk about spreading Modern Monetary Theory, watching/avoiding the UK budget, automatic stabilisers and an idea for an MMT activist manifesto.
8 Richard Murphy: Corbynomics And Labour's Fiscal Credibility Rule
Patricia and Christian chat with Richard Murphy, economist and author of The Joy Of Tax, about what the UK government deficit actually is: your money! We also talk about Corbynomics, Labour's Fiscal Credibility rule and the difference between fiscal policy and monetary policy.
7 Steven Hail: Inflation, Price Shocks And Other Misunderstandings
Patricia and Christian chat with Dr Steven Hail, MMT economist and author of "Economics for Sustainable Prosperity" about where your money goes when you pay your taxes. Spoiler alert: nowhere! Also under discussion: the difference between price shocks and inflation, the irrational assumptions of orthodox economists.
6 What makes a currency valuable?
Christian Reilly interviews Nathan Tankus, Research Scholar at the Modern Money Network (MMN) in the US to find out how currencies work, what makes them valuable. Learn about affects exchange rates, inflation, and what’s happening in Venezuela.
5 A Job Guarantee vs a Universal Basic Income
Christian Reilly and Patricia Pino interview leading US activist Rohan Grey on the efforts to push through a job guarantee. How does it compare to a Universal Basic income (UBI)?
4 What is the Job Guarantee?
Patricia Pino and Christian Reilly interview Fadhel Kaboub, President of the Binzagr Institute for Sustainable Prosperity to discuss the new policy advocated by MMT activists which is generating debate in the US after support from Senator Bernie Sanders. What is a Job Guarantee, how does it compare to UBI?
3 Why we can always afford a war
Patricia Pino and Christian Reilly discuss Government ‘debt’ and explain why politicians never ask “how are you going to pay for it?” when it comes to war.
2 Monetary Sovereignty
What does it mean to be Monetarily Sovereign and why does it matter?
Patricia Pino and Christian Reilly discuss how some erroneous mainstream economic concepts are confusing us and undermining our understanding of world economic problems.
1 A hypothecated tax for the NHS?
Christian Reilly and Patricia Pino explain why we don't need a hypothecated tax for the NHS, and why it’s so damaging to believe that we do.
What taxes are for?:
Taxpayers don’t fund anything
Taxes for revenue are obsolete
7 Deadly Innocent Frauds
by Warren Mosler
Monetary Sovereignty is the foundation of economics
by Rodger Malcolm Mitchell
White Paper: Modern Monetary Theory (MMT)
The purpose of this white paper is to publicly present the fundamentals of MMT.
What is MMT?
What is Money?
From The Banking Law Journal, May 1913.
By A. Mitchell Innes
Reliance on monetary policy is mindless ideological nonsense
Yesterday the RBA decided to cut interest rates to record low levels. The decision won’t save the economy from recession and highlights the sort of desperation that central bankers now face as governments shunt the responsibility of counterstabilisation onto them while claiming that achieving fiscal surpluses is the brief of the treasuries.
The Facts of Modern Monetary Theory
There are several misconceptions and misunderstandings as to the true meaning of Modern Monetary Theory, writes John Doyle
The budged deficit and the national debt are not the same thing
by Ellis Winningham Feb 2019
Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems
By L. Randall Wray
In a challenge to conventional views on modern monetary and fiscal policy, this book presents a coherent analysis of how money is created, how it functions in global exchange rate regimes, and how the mystification of the nature of money has constrained governments, and prevented states from acting in the public interest. The posts from the MMT Primer series have been collected and organized into Randy’s latest book, Modern Money Theory. It makes for a much more coherent read and is highly recommended for anyone seriously interested in the MMT perspective. (Available from Amazon.com)
by William Mitchell, L. Randall Wray, Martin Watts
Publisher: Red Globe Press 2019
William Mitchell is a Professor of Economics at the University of Newcastle, Australia
L. Randall Wray is a Senior Scholar at the Levy Economics Institute of Bard College, USA
Martin Watts is a Professor of Economics at the University of Newcastle, Australia
This groundbreaking new core textbook encourages students to take a more critical approach to the prevalent assumptions around the subject of macroeconomics, by comparing and contrasting heterodox and orthodox approaches to theory and policy. The first such textbook to develop a heterodox model from the ground up, it is based on the principles of Modern Monetary Theory (MMT) as derived from the theories of Keynes, Kalecki, Veblen, Marx, and Minsky, amongst others. The internationally-respected author team offer appropriate fiscal and monetary policy recommendations, explaining how the poor economic performance of most of the wealthy capitalist countries over recent decades could have been avoided, and delivering a well-reasoned practical and philosophical argument for the heterodox MMT approach being advocated.
The book is suitable for both introductory and intermediate courses, offering a thorough overview of the basics, while covering everything needed for more advanced courses. Issues are explained conceptually, with the more technical, mathematical material in chapter appendices, offering greater flexibility of lecturer use.
(Expensive BUT may be the best textbook on the market.)
The Centre of Full Employment and Equity
An official research centre at the University of Newcastle.
The Levy Economics Institute of Bard College
Founded in 1986 through the generous support of Bard College trustee Leon Levy, it is a nonprofit, nonpartisan, public policy research organization.
The Modern Money Network
Aims to bring accurate and accessible knowledge of monetary and financial systems to the broader public.
Gower Initiative for Modern Money Studies
A brief introduction to Modern Monetary Theory
Bill Mitchell - Modern Monetary Theory
Macroeconomic research, teaching and advocacy
(Bill Mitchell is a one man research centre. He has a long list of topics he has discussed over the years as well as comments on current issues.)
VIDEOS ON NEO-LIBERALISM
This is Neoliberalism – Introducing the Invisible Ideology (Part 1)
If you've ever wanted to understand what neoliberalism is, this is the series for you. Neoliberalism is an economic ideology that exists within the framework of capitalism. Over four decades ago, neoliberalism become the dominant economic paradigm of global society. In this video series, we'll trace the history of neoliberalism, starting with a survey of neoliberal philosophy and research, a historical reconstruction of the movement pushing for neoliberal policy solutions, witnessing the damage that neoliberalism did to its first victims in the developing world, and then charting neoliberalism's infiltration of the political systems of the United States and the United Kingdom. Learn how neoliberalism is generating crises for humanity at an unprecedented rate.
This Is Neoliberalism ▶︎ Keynesian Embedded Liberalism (Part 2)
If you've ever wanted to understand what neoliberalism is, this is the series for you. Neoliberalism was a reaction. It was an effort to disassemble a previous vision of society that once held sway over most of the world. In order to understand neoliberalism, it’s important to first understand the world before neoliberalism; the world which neoliberalism considered unacceptable, and in need of urgent reconfiguration. Learn about the world of embedded liberalism.
This Is Neoliberalism ▶︎ Hayek and the Mont Pelerin Society I: 1918 - 1939 (Part 3)
If you've ever wanted to understand what neoliberalism is, this is the series for you. The story of neoliberalism is a story about the power of ideas. Embedded liberalism was in power, but it was not without resistance. Academics and businessmen who opposed the New L RANDEL WRAYDeal and British social democracy were only begrudgingly accepting of the situation at best, or on the warpath against government intervention in the economy at worst. These two factions allied with one another to create an idea so powerful that it would covertly undo their losses to embedded liberalism by supplanting it entirely. This is where the story of neoliberalism begins.
MMT ON TWITTER
Gower Initiative for Modern Money Studies
MMT Podcast (Christian Reilly)
STΞPHΞN SARGΞNT #MMT
Austerity is Murder
Sara Holland #MMT
Pavlina R Tcherneva
Warren B. Mosler #MMT
Please feel free to make comments and suggestions!