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The Fight for the NHS/MMT economics

It isn’t a free lunch at all. Have a watch of the video. It may take a couple of watches as I already started a fair way in as I recognise Thatcherism, Osborne and for that matter anything Labour have to be absolute bullshit that deliberately and fundamentally misrepresents how state issued money works. We are living the lie right now, this is just a far better analysis of exactly where we are and how to control the parameters that actually matter. The MMT analysis of how money is issued is correct. The analysis of how state and private deficits balance looks to be correct too.

As I say there is a lot more I want to understand (as stated I don’t consider full employment to be either possible or desirable, I also don’t believe in an arbitrary state dictated ‘minimum wages’ etc), but I know for sure the current system is based on a fundamental lie. It just is. All evidence points to that.
Unfortunately the Lib Dems, the SNP and the Greens are also part of the misrepresentation
 
Unfortunately the Lib Dems, the SNP and the Greens are also part of the misrepresentation

Agreed. UK politics is in a total death spiral. I see no real intellect or desire for democracy, accountability or logic anywhere. The Tories and Labour are the major blocks though. These are the two parties absolutely intent on locking down and maintaining a clearly failed system. They are the ones to fight against the hardest.
 
Thank you for your reply. You are absolutely correct in that you and I, and everyone else outside the issuing bank, cannot have something for nothing, there is indeed, no free lunch for us. But that government can and does issue money into existence is undeniable. To say that the government requires income from tax before it can spend is nonsense, it’s as if you sit down to a game of monopoly and the banker says to all the players that they have to hand over money before the game san start. It makes no sense.

I must correct one huge misunderstanding. MMT guys do not think inflation does not exist. MMT recognise inflation very clearly. It is central to MMT thinking. MMT says that inflation is the real limit to government spending. The limit to government spending is not the availability of money, because as the issuer, government has a never ending supply. The UK government cannot run out of £’s. Unemployment is the other side of the coin. So rather than balancing the books, which is no more that balancing numbers on a spread sheet, MMT say we should balance the economy, that we should balance unemployment with inflation. The numbers on the spreadsheet don’t matter much, what happens in the real world matters a lot more.

Also, you mention borrowing. But government borrowing is another accounting exercise to balance the books. In order to cover ‘the deficit’, government sells bonds and securities that are bought by the private sector. But paying back that ‘borrowing’ again comes from the central bank issuing the money to pay the returns when they’re due. Government borrowing is not like the borrowing that you and I understand where we have to pay back from our income. The government pays back by issuing the money.

Finally, I don’t think it helps to see MMT as a right/left thing. Many aspects of MMT would appeal to right wingers and some would appal left wingers. For example, MMT describes the means to full employment, Warren Mosley talks of Transitional Employment which could appeal to the right wing supporter of Welfare to Work. As a proponent of Sovereign Money, MMT is against giving up a sovereign currency such as our for another currency such as the Euro, something that might have a few radical Remainers up in arms?

Whatever your political beliefs, MMT deserves serious consideration. Its difficult because it involves turning our thinking upside down, but if we’re not prepared to turn our understanding on it’s head, we’d still believe that the sun goes around the earth

I’m not saying govt requires tax before it spends, but shouldn’t spend more than it is projected to receive within a reasonably managed timescale i.e. the debt should not simply be allowed to increase forever. If inflation is the real limit to govt spending, I’d suggest we’ve hit those limits! Yet Sunak is throwing it around like confetti. If political parties don’t ‘get it’ (despite actually doing it based on current spending levels), who does? Where is MMT the officially adopted policy, where has it been successfully implemented?
 
Like all other economic theories (Keynesian, Marxist, Monetarist, etc.) MMT will be hotly debated by learned economists for decades. I doubt they'll ever come to a consensus: these things are like religion.

Based on the little I've read of MMT, I have 2 main questions for those who are further ahead in the reading:
- Central bank independence: is this a goner? MMT seems to assume that the government of country A decides how much fiat money needs to be created for the needs of the economy of A, and the central bank just goes ahead and executes, no ifs, no buts. Central bank independence is a fairly recent innovation in many countries, but it was introduced for a reason. Do MMT proponents explicitly reject it? If not, what constraints do they place on it?
- Foreign exchange, balance of payments and more generally boundary conditions with other economies, currencies and financial markets. MMT seems to incorporate a bias towards autarky. This is a particular concern for medium size economies like the UK that don't benefit from a huge domestic market like the US and run a structural (and in the case of post-Brexit UK, worsening) deficit on their balance of trade.

I distinctly remember the Mitterrand 1 government in France trying something vaguely similar in 1981. It didn't end well. Foreign currency controls were introduced, the use of credit/debit cards abroad was stopped or limited, etc. Mitterrand had to stop his experiment after 2 years, and claimed he had been defeated by "the wall of Money". But maybe "this is different".

For a bit of balance, a socialist/marxist critique of MMT: https://www.socialist.net/marxism-vs-modern-monetary-theory.htm
 
Agreed. UK politics is in a total death spiral. I see no real intellect or desire for democracy, accountability or logic anywhere. The Tories and Labour are the major blocks though. These are the two parties absolutely intent on locking down and maintaining a clearly failed system. They are the ones to fight against the hardest.
There was a video clip of a young MMTer confronting Nicola Sturgeon about creating a Scottish Reserve saying that Scottis Independence without having sovereign money is no Scottish Independence at all (and could go badly wrong, see Greece). Sturgeon was visibly ruffled. She, along with all the others, are telling the same lie, it'd be nice if we could ruffle few more feathers.

Even the sainted Jeremy Corbyn who did know better, decided on 'fiscal rectitude' for electoral reasons. He was listening to an MMT adviser called Bill Mitchell, but sided with McDonnell when he started to look electable. I understand why, you can see in every newspaper front story about the Budget, that the Household Budget Myth is all pervasive. An opposition that is explicitly MMT would get ridiculed in the press and in the pub

In fact as I start to reassess so many things in the light of MMT I find myself having to re examine my own comfortable truths like The Referendum and Socialism. One consequence of MMT is that having sovereign money is a very good idea, while the potential consequences of giving it up, see Greece, are not a good idea. Tony Benn's opposition to the EU was around sovereignty, including monetary sovereignty so perhaps he was aware of economic consequences of 'ever closer union' and the encircling arms of the EuroZone.

If I knew in 2016 what I know now, would I have voted Remain. Maybe, because we weren't in the Euro Zone, but, and I'm happy to be challenged here, from an MMT perspective, the EuroZone is a minefield. After all a few PIIGS have stepped on a couple of those mines (see what I did there?

A socialist question is how does the all embracing and morally correct principle of Internationalism fit in with sovereign money?

I might have to give up politics and party principles altogether....and join the Lib Dems.
 
Really appreciate the ideas and debate arising from this thread but this bit:
In order to cover ‘the deficit’, government sells bonds and securities that are bought by the private sector (and play an important part in insurance an pensions) But paying back that ‘borrowing’ again comes from the central bank issuing the money to pay the returns when they’re due.

..does sound like a free lunch or magic money tree to me....
 
Really appreciate the ideas and debate arising from this thread but this bit:


..does sound like a free lunch or magic money tree to me....
It Is.

When Theresay May said that government does not have a Magic Money Tree, she lied, it does. it's the Central Bank.

But just as MMT does not stand for Magic Money Tree, so the opposite it true. The government does stand for the Magic Money Tree, it stand right under it, but it's keeping it secret because it wants to direct the fall of fruit where it likes and away from areas it doesn't like. It's a mechanism of control, not balance
 
There was a video clip of a young MMTer confronting Nicola Sturgeon about creating a Scottish Reserve saying that Scottis Independence without having sovereign money is no Scottish Independence at all (and could go badly wrong, see Greece). Sturgeon was visibly ruffled. She, along with all the others, are telling the same lie, it'd be nice if we could ruffle few more feathers.

Even the sainted Jeremy Corbyn who did know better, decided on 'fiscal rectitude' for electoral reasons. He was listening to an MMT adviser called Bill Mitchell, but sided with McDonnell when he started to look electable. I understand why, you can see in every newspaper front story about the Budget, that the Household Budget Myth is all pervasive. An opposition that is explicitly MMT would get ridiculed in the press.

In fact as I start to reassess so many things in the light of MMT I find myself having to re examine my own comfortable truths like The Referendum and Socialism. One consequence of MMT is that having sovereign money is a very good idea, while the potential consequences of giving it up, see Greece, are not a good idea. Tony Benn's opposition to the EU was around sovereignty, including monetary sovereignty so perhaps he was aware of economic consequences of 'ever closer union' and the encircling arms of the EuroZone.

If I knew in 2016 what I know now, would I have voted Remain. Maybe, because we weren't in the Euro Zone, but, and I'm happy to be challenged here, from an MMT perspective, the EuroZone is a minefield. After all a few PIIGS have stepped on a couple of those mines (see what I did there?

A socialist question is how does the all embracing and morally correct principle of Internationalism fit in with sovereign money?

I might have to give up politics and party principles altogether....and join the Lib Dems.
Best post of the year - KS 's Elwood moment - you have arrived at singularity: the moment when a socialist is unable to distinguish him or her self from Tony Benn.
 
Even the sainted Jeremy Corbyn who did know better, decided on 'fiscal rectitude' for electoral reasons. He was listening to an MMT adviser called Bill Mitchell, but sided with McDonnell when he started to look electable. I understand why, you can see in every newspaper front story about the Budget, that the Household Budget Myth is all pervasive. An opposition that is explicitly MMT would get ridiculed in the press.

In fact as I start to reassess so many things in the light of MMT I find myself having to re examine my own comfortable truths like The Referendum and Socialism. One consequence of MMT is that having sovereign money is a very good idea, while the potential consequences of giving it up, see Greece, are not a good idea. Tony Benn's opposition to the EU was around sovereignty, including monetary sovereignty so perhaps he was aware of economic consequences of 'ever closer union' and the encircling arms of the EuroZone.
I am convinced this was a large part of Corbyn's, erm, ambivalence towards EU membership. That and restrictions placed on state aid.
 
For a bit of balance, a socialist/marxist critique of MMT: https://www.socialist.net/marxism-vs-modern-monetary-theory.htm

Interesting and good to see they end up in conflict. It almost certainly means MMT can be taken rather more seriously. I’m of the view that Marx provided a remarkably clear and accurate analysis of the capitalism of his era, but an absolute bullshit answer to it that is impossible to implement without the ugliest and most extreme authoritarianism imaginable. Das Kapital really is well worth reading. The Communist Manifesto is just utter arse gravy.
 
Best post of the year - KS 's Elwood moment - you have arrived at singularity: the moment when a socialist is unable to distinguish him or her self from Tony Benn.
For all the times I've been described as hard left, extremist, Trotskyist and all the rest, me, myself I has never really described where I actually am!
 
If you are genuinely interested to find out what MMT means I would urge you to listen to the linked podcasts.

I shall do, but there's an obvious answer to your point:

A though experiment: If the government wants to spend a £120b on a high speed railway, then if all it does is instruct the Bank of England to credit the appropriate banks accounts belonging of the appropriate builders of the high speed railway, and the Bank of England then puts £120b in the governments debit column. And if some of that money, let's say £60b, comes back as tax. Then £60b is taken off the £120b leaving £60b in the government's debit column.....

.....who then owe's who what?

Its clear that the original £120Bn doesn't come from anywhere as such (i.e. it is increasing the money supply, or crudely "printing money"), but there is a clear cost to the country for that spend which does need to be accounted. I've always taken the notional "borrowing" to be clumsy accounting shorthand for a much more complex mechanism:

By spending the money on a large project such as this you are taking manpower and material resource* from something else (Hospital, School, Roads, whatever, so there is Opportunity cost) and substantially increasing the net amount of money paid to the national workforce. It seems to me that it is the eventual trickle down of this additional money paid to individuals into hard resources that is the real monetary "cost". i.e. The additional money paid results in more consumption of true limited resources in the sovereign economy (e.g. more building materials, better food, more luxury items, meaning more consumption of the ultimate resource of other peoples labour and raw materials) and also of Foreign imports. The exchange rate mechanism very broadly supports the idea that if you buy something from another sovereign state, the broad equivalent in worth must be returned in goods (or in national assets such as ownership of key infrastructure etc, as we have seen). In practice absolute exchange values in terms of real purchasing power may be highly distorted, hence the "Fair Trade" concept.

So the net result of spending too much on such capital projects (might be termed "printing money" though again a clumsy term) is counter-productive as there is a finite limit on resources meaning a limit on what can be accomplished anyway + the risk of spiralling inflation and falling currency values.

Of course the trick is to perform enough spending to stimulate high employment and high productivity - periods of economic downturn amount to a failure in the economic system. So Government spending is a tool to increase employment and also productivity (make it more worthwhile to produce more) - if this reduces the slack in the economy and improves lives, obviously a good thing.

So nobody necessarily owes to anyone else (other than via exchange rate mechanisms), but just saying there is (or can be) a real negative cost to "Government borrowing" (as defined above).

And taxation is a mechanism for reducing people's spending power to put a brake on some of this.
 
Interesting and good to see they end up in conflict. It almost certainly means MMT can be taken rather more seriously. I’m of the view that Marx provided a remarkably clear and accurate analysis of the capitalism of his era, but an absolute bullshit answer to it that is impossible to implement without the ugliest and most extreme authoritarianism imaginable. Das Kapital really is well worth reading. The Communist Manifesto is just utter arse gravy.

Hang on, I've only just got round to reassessing the EU. Don't get me started on Marx
 
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- Central bank independence: is this a goner? MMT seems to assume that the government of country A decides how much fiat money needs to be created for the needs of the economy of A, and the central bank just goes ahead and executes, no ifs, no buts.
- Foreign exchange, balance of payments and more generally boundary conditions with other economies, currencies and financial markets. MMT seems to incorporate a bias towards autarky.
1. Yes, the idea is that IRs stay near zero and inflation is controlled by fiscal means (tax rises, spending cuts, job creation schemes).
2. Indeed it's much easier to print money without consequence when your currency is the world's reserve currency.
 
I shall do, but there's an obvious answer to your point:



Its clear that the original £120Bn doesn't come from anywhere as such (i.e. it is increasing the money supply, or crudely "printing money"), but there is a clear cost to the country for that spend which does need to be accounted. I've always taken the notional "borrowing" to be clumsy accounting shorthand for a much more complex mechanism:

By spending the money on a large project such as this you are taking manpower and material resource* from something else (Hospital, School, Roads, whatever, so there is Opportunity cost) and substantially increasing the net amount of money paid to the national workforce. It seems to me that it is the eventual trickle down of this additional money paid to individuals into hard resources that is the real monetary "cost". i.e. The additional money paid results in more consumption of true limited resources in the sovereign economy (e.g. more building materials, better food, more luxury items, meaning more consumption of the ultimate resource of other peoples labour and raw materials) and also of Foreign imports. The exchange rate mechanism very broadly supports the idea that if you buy something from another sovereign state, the broad equivalent in worth must be returned in goods (or in national assets such as ownership of key infrastructure etc, as we have seen). In practice absolute exchange values in terms of real purchasing power may be highly distorted, hence the "Fair Trade" concept.

So the net result of spending too much on such capital projects (might be termed "printing money" though again a clumsy term) is counter-productive as there is a finite limit on resources meaning a limit on what can be accomplished anyway + the risk of spiralling inflation and falling currency values.

Of course the trick is to perform enough spending to stimulate high employment and high productivity - periods of economic downturn amount to a failure in the economic system. So Government spending is a tool to increase employment and also productivity (make it more worthwhile to produce more) - if this reduces the slack in the economy and improves lives, obviously a good thing.

So nobody necessarily owes to anyone else (other than via exchange rate mechanisms), but just saying there is (or can be) a real negative cost to "Government borrowing" (as defined above).

And taxation is a mechanism for reducing people's spending power to put a brake on some of this.
There is of course a fine limit of resources, which is why The Green New Deal is so important. The MMT Green Plan is about diverting as much productivity as possible into preserving finite resources and slowing down consumption as much as possible. Hence creating money to build proper cycle ways, installing heat pumps, solar panels and renewable energy sources is an important step to balancing the economy in as sustainable way as possible.

There is also a finite limit on resources, but we are no where near them in a time when there is unemployment. Employing someone to install heat pumps does obvious not require the coming from a Hospital or a School. Hospitals and schools are short of resources so we can and should employ more people and other resources in those areas and employ people to put in Heat Pump.

The 'spending to oblivion, 'spending too much' 'printing money' and 'magic money tree tropes' are all based on false assumptions. MMT is just a description of what actually happens, that spending on public service is no dependant on raising tax income, that the government does in fact have it's own MMT, but just as now, government spending and tax should be used to avoid inflation and economic disasters. It should be noted at this point that the present system has not been very good at prevented disasters, and in the case where politicians actually tried to balance the books caused a disaster, and in the case of Osbourne, prolonged it unnecessarily.

The present system is based on balancing the book. MMT is about a balancing the economy.
 
The 'spending to oblivion, 'spending too much' 'printing money' and 'magic money tree tropes' are all based on false assumptions.

If you accept resources are finite, they are very obviously not altogether false, but of course there is huge legitimate debate about what the responsible level of spend is, what should be spent on, and how the spend should be measured. (e.g. It is not automatically true that say, 1Bn spend on Health can be exactly equated or traded for say 1Bn spend on Defence or Education.)

The present system is based on balancing the book. MMT is about a balancing the economy.

Well, I'm interested to know more so shall read about it, sounds like a nice catchphrase......
 


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