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Deficit Owls 🦉
@DeficitOwls
, 3 tweets, 2 min read Read on Twitter
@dandolfa @stf18 1) MMT is very incomplete. Details on central bank operations have only been compiled for a few countries, many more to go. 2) because MMT views money as a political tool for moving resources to the state (as opposed to a market invention to reduce transaction costs), MMT really
@dandolfa @stf18 should come with a theory of politics and state formation but it mostly doesn’t. Specifically: the MMT story starts with a gov with taxing authority creating a currency to provision itself - but where did the taxing capacity come from? Taxing requires resources, so how did the
@dandolfa @stf18 gov get these resources before the currency gets created? 3), related to my own current project so I don’t want to say too much, but MMT has a few things to learn from wartime economies. More soon :)
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Deficit Owls 🦉
@DeficitOwls
April 27, 1942: with prices rising due to war conditions, Roosevelt lays out a 7-point plan to fight inflation. It includes heavy taxes, price ceilings, wage and farm price control, war bond drives, rationing, and credit curtailment. Inflation fell from 11% in 1942 to 2% by 1944.
In my view, this invalidates the view that politicians cannot possibly get their act together to deal with inflation if it becomes a problem. During the war, inflation was taken very, very seriously.
The full text of Roosevelt's 1942 announcement of policy to fight inflation is here: archive.org/details/492659…
Read 3 tweets
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Deficit Owls 🦉
@DeficitOwls
What possible tools could we use to fight inflation besides interest rates and taxes? Hmm, what do you think, book from 1951?
And this is from a book that repeatedly insists that "The fundamental cause of inflation... has been the printing of money or its modern counterpart the creation of bank credit..." Clearly they have more imagination than the Monetarists did.

For anybody who's wondering, this is "The Economics of Armament Inflation," by Jules Backman (NYU), 1951.
Read 3 tweets
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Deficit Owls 🦉
@DeficitOwls
MMTers rightly point out that "the burden of the national debt" is largely a myth for a nation like the US. But I don't think enough attention has been paid to the difference between peacetime debt and wartime debt. This will become important for a Green New Deal. (1/n)
(With the caveat that this thread is about a total war like WW2, not the kind of smaller ongoing wars that the US has been engaged in the last few decades) (1.5/n)
In normal times, basically everything the commentariat says about national debt is wrong, but in an economy completely mobilized for waging a war (or waging a GND), some of it becomes (almost) true. (2/)
Read 21 tweets

Related threads

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Richard Tye
@widespreadhaze
Interesting article by @meadwaj in Tribune Magazine called 'Against Modern Monetary Theory' tribunemag.co.uk/s/91dc1087b5fa… Here are some initial thoughts in response in order to stimulate good-natured debate:
Meadway asserts that ‘money is a creature of law’ is a “dubious historical claim”. This is ahistorical. History shows that it is the power of the state and its institutions that have ensured state money’s dominance since the earliest civilisations of the ancient near east.
It is the state’s unrivalled power to coerce, imposing legal financial obligations denominated in its money, that makes simple credit into money. Taxes force certain members of the public to demand the state’s credits in return for goods and services rendered.
Read 22 tweets
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Citizens' Media TV 🦉🌹
@citizensmediatv
1/ #LearnMMT song parody: “I Am The Very Model of a Modern Monetary Theory. [THREAD v1]

Sung to the tune of “I Am The Very Model of a Modern Major General" from Gilbert & Sullivan's The Pirates of Penzance. Here’s a fantastic performance of the original:
2/ Notes: The full length verse is in the structure "main verse (long) 👉 chorus 👉 short verse." This parody mixes it up a bit.

Key:
🎶 = Start of main verse (long)
🎵 = Chorus
🎼 = Post chorus verse (short)

A crude version sung by me is at the end of this thread.
3/ 🎼 The... very model of a Modern Monetary Thee-o-ry.
Where all fed spending’s always paid for with created currency.
Which logically extends that taxes cannot pay for anything.
Read 22 tweets
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Gower Initiative for Modern Money Studies
@GowerInitiative
“With floating exchange rate policies, central banks target policy interest rates - prices - rather than any money aggregate. The narrative favoured by central banks and academics is that of the central bank adjusting the quantity of reserves supplied in order ....”
“to keep market rates in line with their target rate.
This implies that, in the US case for example, the Fed varies the quantity of reserves in order to achieve its interest rate target.
However, we argue in favour of a reverse causality vis-a-vis orthodox analysis...”
“and contend that rather than adjusting the supply of reserves to meet its policy rate, as the monopoly issuer of reserves in a floating exchange rate regime, the central bank, in practice, acts as the price-setter for the level reserves demanded by the banking system”
Read 4 tweets
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Black Socialists of America
@BlackSocialists
We know @AOC has been speaking with @StephanieKelton and other #MMT folks.

She’s been doing a GREAT job handling the “how are we gonna pay for it?” questions, but here are key points to remember:

• Gold standard ended in 1971.

• We have a fiat currency.

• Money is credit.
Our “tax dollars” don’t actually “pay for” things.

The Federal Reserve actually makes all of the Treasury payments, and it has been this way since 1913.

It gets more complicated than this, but:

1) Treasury has Fed CREDIT bank reserves.

2) Banks credit accounts (DIGITALLY).
The Treasury spends by having the central bank credit bank reserves.

The Treasury receives tax payments by debiting bank reserves.

This is pretty much (systematically) like burning paper notes.

We have special banks now (like dealer banks, for example), but that’s the gist.
Read 5 tweets
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Just J
@consbyname
For me the biggest insight regarding #MMT isn't that taxes aren't needed prior to spending but that bonds are for monetary policy not fiscal. The big scary borrowing everyone hammers on about so much is nothing more than savings opportunities with an interest rate set by the BoE.
This realisation opens up important discussions about whether these savings opportunities are being provided on a fair and equitable basis, or indeed, whether they should exist at all in this format given the misinterpretation of their function.
Whilst eliminating interest on government "debt" may well be desirable, it would also eliminate safe savings opportunities for those in the private sector. For me personally, if a ZIRP were to be implemented then an offer should be made for individual savers. This may be in the
Read 7 tweets
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Citizens' Media TV
@citizensmediatv
1/ An extraordinary first article for understanding Modern Monetary Theory #MMT: “Cutting the federal deficit to cure a recession is like applying leeches to cure anemia.” #LearnMMT mythfighter.com/2010/08/13/mon…
2/ Freaking out about the deficit and the debt is to myopically focus on only the federal government’s bank account at the expense of every private citizen. A balanced budget for the federal government takes money directly out of the pockets of every American. #LearnMMT
3/ Freaking out about the deficit & debt is sort of like only caring about the financial condition of the parents while completely ignoring the well-being of all of their children – and the family as a whole. What is best for the FAMILY?! What is best for the COUNTRY?! #LearnMMT
Read 6 tweets

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