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13 Oct, 4 tweets, 1 min read
I saw this on the ‘Hedge: “MMT notes that bank loans create deposits not the other way around. Well... it's obviously wrong.”

Ah yes, MMTers discovered an accounting identity that has been known probably from before WWII.
(In case why one wonders why an accounting identity is allegedly wrong, the QE operations create deposits if the sellers are non-banks. This has meant that deposits are greater than loans.)
However, being a MMT critic seems like fun. “MMT says that lead weights fall faster than feathers in a vacuum. This is wrong.”
(Since this tweet got a few likes, I just want to say that I can’t give a link easily. It’s from ZeroHedge, but the text appears only in the teaser on the front page article listing. I didn’t see the text within the article, so linking it directly won’t lead to the quote.)

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More from @RomanchukBrian

Brian Romanchuk Profile picture
13 Oct
Yet more content - “Primer: Teaching Models Versus Empirical Models”

This is another preliminary article I got out of the way before getting to my analysis of DSGE macro. bondeconomics.com/2020/10/primer…
The distinction between a teaching (or toy) model and an empirical model seems easy to understand. The problem is that publication standards in economics result in an obfuscation of this rather critical distinction.

That is, people are treating teaching models as empirical ones.
If we keep this distinction in mind, then DSGE macro is a lot easier to understand. It’s almost exclusively teaching models, that can’t be plausibly fit to data - at least in any sense an applied mathematician would understand the term.
Read 5 tweets
Brian Romanchuk Profile picture
12 Oct
New article: “DSGE Models As Arbitrage-Free Pricing Models”

After today’s highly exciting news about auction theory, going back to boring old macroeconomics.

This article ends a mini-cycle, which provides some background for a longer cycle of articles. bondeconomics.com/2020/10/dsge-m…
My argument is that there is too much mysticism about equilibrium concepts and DSGE models. They are just a variant of arbitrage-free pricing models, with the instruments including physically delivered composite consumer goods and labour hours.
An outsider might ask: why we are building arbitrage-free pricing models for non-existent markets? I’m sure there’s an entirely reasonable explanation for this. However, it obviously adds a near-crippling level of complexity to model construction.
Read 6 tweets
Brian Romanchuk Profile picture
18 Jun
Thanks to “The Deficit Myth” hitting the NYT bestseller list, MMT is back on the Twitter menu. I’m going outside to write, but I just want to comment on what I’m seeing here.
If we look at tweets, we can split the MMT critics between “serious critics” and “trolls.” I follow a lot of the “serious critics,” but what I mainly see are “trolls” who get dragged into my timeline. My suggestion is to not give trolls oxygen; create a “bad MMT takes” account.
As for the serious critics, it all revolves around the “nothing new” charge. After seeing that debate 1,000 times, I’m bored of it - as I imagine any bystanders on Twitter are.

The “something new” debate is an academic debate, and should only be of interest only to academics.
Read 7 tweets
Brian Romanchuk Profile picture
28 May
“*The Deficit Myth* and Modern Monetary Theory”

Attempted take-down of S. Kelton’s upcoming book by Tyler Cowen. This review has a lot of questionable points about MMT. (I’m waiting to order my copy of the book, so I can’t comment on it.) marginalrevolution.com/marginalrevolu…
Just responding to a couple points. Conplaining that the Fed cannot control real interest rates is an example of soewing jargon without using one ounce of common sense. What’s gonna happen in response to loose fiscal policy - hyper deflation?
Another real/nominal point is that there is a real fiscal constraint, not nominal. Anyone who was paying attention to Functional Finance would pick up that the constraint is inflation – which is between nominal and real. The usual phrasing resembles “real constraints matter.”
Read 4 tweets
Brian Romanchuk Profile picture
12 Mar
The thing to keep in mind is that equity markets are not really used to raise capital. (In fact, courtesy of buyback plans, where capital goes to die.) Credit markets are the lifeblood of capitalism.

In the absence of defaults, credit should bounce back. Unfortunately...
I was never a big credit person (but got dragged into it courtesy of the Financial Crisis), and I’ve no access to market gossip or data. But even I can see a few flash points.

The most worrisome is the interaction between European banks and euro sovereigns. (Oops.)
After that, we are down to sector stories - e.g., airlines, US energy sector, and companies that got laden up with debt by private equity.

I’m sure there’s horror stories, but credit markets can absorb some defaults.
Read 6 tweets
Brian Romanchuk Profile picture
22 Jan
@joborg By popular request (OK, a request), this thread runs through the sequence of articles that are expected to turn into a chapter in an intermediate MMT primer.

The primer is supposed to answer the question "What is MMT?" but is aimed at readers with a background in economics.
This is meant to deal with the awkward situation where followers of other schools of economics attempt to critique MMT - and just make stuff up.

People need a compact guide to MMT, written at a high level, without being forced to pay pirate publishers big $ for journal articles.
The first article in the sequence is on Warren Mosler's White Paper. In it, he offers an extremely terse summary of some of the main concepts of MMT.

bondeconomics.com/2020/01/mmt-pr…
Read 25 tweets

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