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Modern Monetary Theory

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Modern Monetary Theory (MMT) is an extremely fringe economic concept that, notwithstanding its supporters' claims, is little more than an attempt to justify fiscal irresponsibility. You won’t find any MMT among the main economics scholars, but MMT is relatively popular among moonbats and a few economics professors at second-tier colleges.[1] Even most sane leftish economists are aware that MMT is indefensible.[2]

Concept[edit]

Despite the pompous name, MMT is not new or even a theory, since its proponents are always avoiding any sort of criticism to make their premises irrefutable. Among the most famous MMT theologists, we can mention the crank Randall Wray. Never heard of him? You're not missing too much. Just another guy that failed at being a scholar in a relevant academic center.

According to Professor Wray, MMT's most important conclusion is “that the issuer of a currency faces no financial constraints. Put simply, a country that issues its own currency can never run out and can never become insolvent in its own currency. (…) [F]or most governments, there is no default risk on government debt.”[3] It's as ridiculous as it sounds. Of course, the government can always print more money; it's just that overdoing it causes inflation. Some MMTers (mainly the political branch of the movement, especially around the Green New Deal and adjacent movements) seem cognizant of the deleterious effects of inflation, but even those who know how bad inflation is dodge the conclusion that their theory will erode the economy. Again, according to Mr. Wray, “no simple proportionate relationship exists between rises in the money supply and rises in the general price level.” This is a blatant lie, since the correlation of money growth and inflation is 0.8 in US, with similar correlations elsewhere.[4]

Despite not ignoring the mainstream approach totally, Wray and his gang will say that the real cause of inflation is the “class conflict” and that government can prevent inflation by taxing the rich and controlling the prices, and that economies typically operate with spare productive capacity. They don’t give evidence to any of their points, however. Considering how the idea of controlling prices have failed for thousands of years,[5] questioning Mr. Wray's understanding of history and economics may be called for.

MMT might describe some economic effects in an interesting way, but as a prescriptive theory is, simply put, about as wrong as the ideas of Murray Rothbard and Walter Block on money, and despite the denial of the supporters, it’s pretty much what Venezuela and Zimbabwe did.[6] Want to know what happened to them? Google their inflation rate.

How MMT won (except it didn’t)[edit]

Following the 2009 crises, and more recently, the Coronavirus pandemic, many governments are printing money to save their economies. Some MMTers believe that it proved that mainstream economics was wrong all the way. Sadly for them, even libertarian radicals like Milton Friedman[7] supported of an active fiscal and monetary policy during crises, and statements of this nature just show their general economic ignorance.

See also[edit]

Post-Keynesian economics

References[edit]

  1. MANKIW N. Gregory A Skeptic’s Guide to Modern Monetary Theory
  2. https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wonkish.html
  3. Mitchell, William, L. Randall Wray, and Martin Watts. 2019. Macroeconomics, London: Red
  4. MANKIW N. Gregory A Skeptic’s Guide to Modern Monetary Theory
  5. Forty Centuries of Wage and Price Controls: How Not to Fight Inflation, Robert L. Schuettinger
  6. [1]
  7. FRIEDMAN, Milton. The Great Contraction