Thread by @theHessam

I have been following the discourse surrounding MMT among academic economists and it’s astonishing how dismissive the field is toward any paradigm-shifting ideas.

#MMT is producing insightful & valuable work. They’re starting to get some recognition among the public. But...

1/n

But the response from mainstream economists has been ridicule (eg tweet below) and distortion.

For some reason, they don’t even think it’s worth their time to engage with it at a serious level.

2/n

https://twitter.com/ben_golub/status/1364749567862988802

I know they don’t read the literature because anyone who has spent the slightest amount of time on the subject knows that MMT doesn’t claim there are no constraints to govt spending. Yet, the here’s a tweet from a famous economist

3/n

https://twitter.com/R2Rsquared/status/1362386641898397711

A very common complaint that I see from the critics is that MMT is elusive and there are always people who say “you just haven’t fully understood it”.

Reis says it in the thread above. Krugman says it here.

4/n

https://twitter.com/paulkrugman/status/1101474653917380608

But there are very concrete and simple claims in MMT that an economist should be able to understand and directly criticize. I’d love to see a solid refutation so let me try to make it easy.

A central idea to MMT (both historically and conceptually) is that...

5/n

There’s no effective difference between when the Fed sells bonds and when the Treasury sells bonds.

We call the latter “borrowing” and the former “open market operations”.

See t=3:50 for explanation
6/n

And the same’s true for buying bonds. Everything else follows from accepting this symmetry.

Something that convinced me that they’re right is that the bonds held by the Fed are not a liability for the treasury. In other words The treasury never owes the fed money.

7/n

When bonds held by the Fed mature, they are forgiven or roll over to new bonds. That’s just a fact, not a theory.

So when the Fed buys bonds in its day to day operations, it is as if the Treasury pays its “debt” through the money created by the Fed.

8/n

It’s quite elegant how a new paradigm follows from recognizing a simple symmetry: the symmetry between the Treasury and the Federal Reserve (Central Bank).

This is a very concrete claim. It is central to MMT. It’s novel. Didn’t exist in the field before MMT.

9/n

So serious question in good faith for the academic critics: is this wrong? Can you explain why? If not, will you at least recognize that MMT has brought new insights to your field?

10/10

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