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Good interview by Ed Harrison. In my understanding of Warren Mosler’s explanation of MMT, there are three things that, together, constrain the ability of the government to “create” and spend money in any given period: the amount of taxes taken in, plus the additional amount of...
...money a growing economy needs to hold for transaction and savings purposes, plus the expansion (if any) in the amount of goods and services created by government spending. If the government creates and spends more than that, the result will be inflationary because the...
...government is creating more money than the government and the economy can together absorb, and inflation is simply the form an adjustment takes that drives down the value of money until balance is again reached. Among other things it suggests that if there is enough slack...
...in the economy, there is no constraint on the ability of the government to fund spending on unemployed workers or on productive investment. For those who worry about a rising debt burden associated with government infrastructure spending, I think the easiest way to think...
...about it is that this kind of spending boosts GDP (and, with it, debt-servicing capacity) at least as quickly as it boosts debt, so that the debt burden doesn’t worsen, and may even improve. What this means for the Green New Deal is that if associated spending is equal to...
...or less than the value of additional goods and services created, there is no constraint on Green New Deal spending. If the former exceeds the latter, the Green new Deal may be justified on other grounds, but not on MMT grounds.
To my MMT friends: did I get it right?
To my MMT friends: did I get it right?
