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The Fight for the NHS/MMT economics

Discussion in 'off topic' started by ks.234, Oct 26, 2021.

  1. ks.234

    ks.234 pfm Member

    Unfortunately the Lib Dems, the SNP and the Greens are also part of the misrepresentation
  2. Tony L

    Tony L Administrator

    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.
  3. Ponty

    Ponty pfm Member

    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?
  4. PsB

    PsB Citizen of Nowhere™

    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:
    paulfromcamden likes this.
  5. Joe Hutch

    Joe Hutch Mate of the bloke

    Ask five economists for an opinion about anything and you’ll get five different answers; six if one is from Harvard.

    (Source forgotten).
    paulfromcamden and Spraggons Den like this.
  6. ks.234

    ks.234 pfm Member

    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.
  7. Spraggons Den

    Spraggons Den pfm Member

    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....
  8. ks.234

    ks.234 pfm Member

    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
  9. Spraggons Den

    Spraggons Den pfm Member

    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.
  10. PsB

    PsB Citizen of Nowhere™

    I am convinced this was a large part of Corbyn's, erm, ambivalence towards EU membership. That and restrictions placed on state aid.
    ks.234 likes this.
  11. Tony L

    Tony L Administrator

    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.
  12. ks.234

    ks.234 pfm Member

    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!
  13. gustavm

    gustavm pfm Member

    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.
  14. ks.234

    ks.234 pfm Member

    Hang on, I've only just got round to reassessing the EU. Don't get me started on Marx
    Last edited: Oct 28, 2021
    Tony L likes this.
  15. Joe Hutch

    Joe Hutch Mate of the bloke

    You’re a hard remainder, like the rest of us.
  16. Heckyman

    Heckyman pfm Member

    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.
  17. ks.234

    ks.234 pfm Member

    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.
  18. ks.234

    ks.234 pfm Member

    Who is suggesting printing money without consequences?
  19. ks.234

    ks.234 pfm Member

    Get thee behind me Darth
  20. gustavm

    gustavm pfm Member

    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.)

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

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