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MMT history and overview
Posted by WARREN MOSLER on August 4th, 2011
Excellent post from Johnsville:
Modern Monetary Theory (MMT) in a Nutshell
A rampaging mutant macroeconomic theory called Modern Monetary Theory, or MMT for short, is kicking keisters and smacking down conventional wisdom in economic circles these days. This is because an energized group of MMT economists, bloggers, and their loyal foot soldiers, lead by economists Warren Mosler, Bill Michell, and L. Randall Wray are swarming on the internet. New MMT disciples are hatching out everywhere. They are like a school of fresh-faced paramedics surrounding a gasping heart attack victim. They seek to present their economic worldview as the definitive first aid for understanding and dealing with the critical issues of growth, unemployment, inflation, budget deficits, and national debt.
MMT is a reformulated blend of some older macroeconomic theories called Chartalism and Functional finance. But, it also adds a fresh dose of monetary accounting for intellectual muscle mass. Chartalism is a school of economic thought that was developed between 1901 and 1905 by German economist Georg F. Knapp with important contributions (1913-1914) from Alfred Mitchell-Innes. Functional finance is an extension of Chartalism, which was developed by economist Abba Lerner in the 1940′s.
However, Chartalism and Functional finance did not directly spawn this new mutant monetary theory. Rather, Modern Monetary Theory had a hot, steamy, Rummy induced, immaculate conception as its creator, Warren Mosler, has stated:
The origin of MMT is 'Soft Currency Economics' [1993] at www.moslereconomics.com which I wrote after spending an hour in the steam room with Don Rumsfeld at the Racquet Club in Chicago, who sent me to Art Laffer, who assigned Mark McNary to work with me to write it. The story is in 'The 7 Deadly Innocent Frauds of Economic Policy' [pg 98].
I had never read or even heard of Lerner, Knapp, Inness, Chartalism, and only knew Keynes by reading his quotes published by others. I 'created' what became know as 'MMT' entirely independently of prior economic thought. It came from my direct experience in actual monetary operations, much of which is also described in the book.
The main takeaways are simply that with the $US and our current monetary arrangements, federal taxes function to regulate demand, and federal borrowing functions to support interest rates, with neither functioning to raise revenue per se. In other words, operationally, federal spending is not revenue constrained. All constraints are necessarily self imposed and political. And everyone in Fed operations knows it.
The name Modern Monetary Theory was reportedly coined (pun unintended) by Australian economist Bill Mitchell. Mitchell has an MMT blog that gives tough weekly tests in order to make sure that the faithful are paying attention and learning their MMT ABC's. MMT is not easy to fully comprehend unless you spend some time studying it.
MMT is a broad combination of fiscal, monetary and accounting principles that describe an economy with a floating rate fiat currency administered by a sovereign government. The foundation of MMT is its recognition of the importance of the government's power to tax, thereby creating a demand for its money, and its monopoly power to print money. MMT's full potential and its massive monetary fire power were not locked and loaded until President Nixon took the U.S. off the gold standard on August 15, 1971.
There is really not that much "theory" in Modern Monetary Theory. MMT is more concerned with explaining the operational realities of modern fiat money. It is the financial X's and O's, the ledger or playbook, of how a sovereign government's fiscal policies and financial relationships drive an economy. It clarifies the options and outcomes that policy makers face when they are running a tax-driven money monopoly. Proponents of MMT say that its greatest strength is that it is apolitical.
The lifeblood of MMT doctrine is a government's fiscal policy (taxing and spending). Taxes are only needed to regulate consumer demand and control inflation, not for revenue. A sovereign government that issues its own floating rate fiat currency is not revenue constrained. In other words, taxes are not needed to fund the government. This point is graphically described by Warren Mosler as follows:
what happens if you were to go to your local IRS office to pay [your taxes] with actual cash? First, you would hand over your pile of currency to the person on duty as payment. Next, he'd count it, give you a receipt and, hopefully, a thank you for helping to pay for social security, interest on the national debt, and the Iraq war. Then, after you, the tax payer, left the room he'd take that hard-earned cash you just forked over and throw it in a shredder.
Yes, it gets thrown it away [sic]. Destroyed!
— The 7 Deadly Frauds of Economic Policy, page 14, Warren Mosler
The delinking of tax revenue from the budget is a critical element that allows MMT to go off the "balanced budget" reservation. In a fiat money world, a sovereign government's budget should never be confused with a household budget, or a state budget. Households and U.S. states must live within their means and their budgets must ultimately be balanced. A sovereign government with its own fiat money can never go broke. There is no solvency risk and the United States, for example, will never run out of money. The monopoly power to print money makes all the difference, as long as it is used wisely.
MMT also asserts that the federal government should net spend, again usually in deficit, to the point where it meets the aggregate savings desire of its population. This is because government budget deficits add to savings. This is a straightforward accounting identity in MMT, not a theory. Warren Mosler put it this way:
So here's how it really works, and it could not be simpler: Any $U.S. government deficit exactly EQUALS the total net increase in the holdings ($U.S. financial assets) of the rest of us – businesses and households, residents and non-residents – what is called the "non-government" sector. In other words, government deficits equal increased "monetary savings" for the rest of us, to the penny. Simply put, government deficits ADD to our savings (to the penny).
— The 7 Deadly Frauds of Economic Policy, page 42, Warren Mosler
Therefore, Treasury bonds, bills and notes are not needed to support fiscal policy (pay for government). The U.S. government bond market is just a relic of the pre-1971 gold standard days. Treasury securities are primarily used by the Fed to regulate interest rates. Mosler simply calls U.S. Treasury securities a "savings account" at the Federal Reserve.
In the U.S., MMTers see the contentious issue of a mounting national debt and continuing budget deficits as a pseudo-problem, or an "accounting mirage." The quaint notion of the need for a balanced budget is another ancient relic from the old gold standard days, when the supply of money was actually limited. In fact, under MMT, running a federal budget surplus is usually a bad thing and will often lead to a recession.
Under MMT the real problems for a government to address are ensuring growth, reducing unemployment, and controlling inflation. Bill Mitchell noted that, "Full employment and price stability is at the heart of MMT." A Job Guarantee (JG) model, which is central to MMT, is a key policy tool to help control both inflation and unemployment. Therefore, given the right level of government spending and taxes, combined with a Job Guarantee program; MMTers state emphatically that a nation can achieve full employment along with price stability.
As some background to understand Modern Monetary Theory it is helpful to know a little about its predecessors: Chartalism and Functional Finance.
German economist and statistician Georg Friedrich Knapp published The State Theory of Money in 1905. It was translated into English in 1924. He proposed that we think of money as tokens of the state, and wrote:
Money is a creature of law. A theory of money must therefore deal with legal history… Perhaps the Latin word "Charta" can bear the sense of ticket or token, and we can form a new but intelligible adjective — "Chartal." Our means of payment have this token, or Chartal form. Among civilized peoples in our day, payments can only be made with pay-tickets or Chartal pieces.
Alfred Mitchell-Innes only published two articles in the The Banking Law Journal. However, MMT economist L. Randall Wray called them the "best pair of articles on the nature of money written in the twentieth century". The first, What is Money?, was published in May 1913, and the follow-up, Credit Theory of Money, in December 1914. Mitchell-Innes was published eight years after Knapp's book, but there is no indication that he was familiar with the German's work. In the 1913 article Mitchell-Innes wrote:
One of the popular fallacies in connection with commerce is that in modern days a money-saving device has been introduced called credit and that, before this device was known, all, purchases were paid for in cash, in other words in coins. A careful investigation shows that the precise reverse is true…
Credit is the purchasing power so often mentioned in economic works as being one of the principal attributes of money, and, as I shall try to show, credit and credit alone is money. Credit and not gold or silver is the one property which all men seek, the acquisition of which is the aim and object of all commerce…
There is no question but that credit is far older than cash.
L. Randall Wray, in his 1998 book, Understanding Modern Money,was the first to link the state money approach of Knapp with the credit money approach of Mitchell-Innes. Modern money is a state token that represents a debt or IOU. The book is an introduction to MMT.
L. Randal Wray is a Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. These institutions are hotbeds of MMT research. Wray also writes for the MMT blog, New Economic Perspectives.
Finally, to finish the historical tour, here is how Abba Lerner's Functional finance is described by Professor Wray:
Functional Finance rejects completely the traditional doctrines of 'sound finance' and the principle of trying to balance the budget over a solar year or any other arbitrary period. In their place it prescribes: first, the adjustment of total spending (by everybody in the economy, including the government) in order to eliminate both unemployment and inflation, using government spending when total spending is too low and taxation when total spending is too high.
Given its mixed history it is not surprising that MMT has been given different labels. Some economists refer to MMT as a "post-Keynesian" economic theory. L. Randall Wray has used the term "neo-Chartalist". Warren Mosler stated, "MMT might be more accurately called pre Keynesian." Given that Georg Knapp's work was cited by John Maynard Keynes, the use of "pre-Keynesian" does seem more appropriate than "post-Keynesian".
But under any category, MMT has been considered fringe or heterodox economics by most mainstream economists. It therefore has been relegated to the equivalent of the economic minor leagues, somewhere below triple-A level. However, that perception is changing.
MMT is slowly seeping into the public policy debate. These days Warren Mosler and others with an MMT viewpoint are frequently being interviewed on business news channels. MMT articles are being published. Recently, Steve Liesman, CNBC's senior economics reporter, used a Warren Mosler quote to make a point. Liesman said: "As Warren Mosler has said: 'Because we think we may be the next Greece, we are turning ourselves into the next Japan'."
MMT is not easy to for many people, including trained economists, to understand. This is probably because of its heavy reliance on accounting principles (debts and credits). Some critics consider MMT nothing more than a twisted Ponzi scheme that is simply "printing prosperity." Calling MMT a "printing prosperity" scheme, by the way, is the quickest way to send MMTers into spasms of outrage. MMT does not "print prosperty" according to its proponents. The MMT counter argument is:
it [is] a perverse injustice that, in online discussions, MMT sympathizers are frequently reproached for imagining that "we can print prosperity" when in fact it is us who constantly stress as a fundamental point that the only true constraints are resource based, not financial or monetary in nature. We are the ones insisting that if we have the resources, we can put them to use. It is the neoclassical orthodoxy and others who try to make out that we can't use resources, even if they are available, because of some magical, mysterious monetary or financial constraint. Just who is it that believes in magic here?
Emotions run hot in the current economic environment, especially on the internet. In some cases the energetic online promoting of MMT has turned into passive aggressive hectoring, hazing, name calling, badgering, and belittling. So be warned, if you write some economic analysis online that disagrees with MMT doctrine you might find yourself attacked and stung by a swarm of MMTers. If you are an economic "expert" and you do not understand monetary basics you may also get mounted on an MMT wall of shame.
A heavyweight Keynesian economist, like Nobel Prize winner Paul Krugman, has felt the sting of MMT. But the quantity and quality of his criticism of MMT, so far, has been featherweight. He could not land a solid glove on the contender, Kid MMT. Krugman only proved that he does not understand MMT, so his criticism was weak (see MMT comments) and his follow-up even weaker. MMT economist James Galbraith did a succinct breakdown of Krugman's major errors.
Another school of economics feeling the heat from MMT are the Austrians. Austrian economist Robert Murphy recently wrote an article critical of MMT, calling it an "Upside-Down World". MMTers lined up to disassemble and refute Murphy's essay. Cullen Roach at the Pragmatic Capitalist blog shot back this broadside::
we now live in a purely fiat world and not the gold standard model in which Mises and many of the great Austrian economists generated their finest work. Therein lies the weakness of the Austrian model. It is based on a monetary system that is no longer applicable to modern fiat monetary systems such as the one that the USA exists in.
Does MMT really offer a path to prosperty? Or did the ancient Roman, Marcus Cicero (106 BC – 43 BC), have it right when he said: "Endless money forms the sinews of war."? The debate will only intensify. If you value those green, money-thing, government IOU tokens in your wallet then it pays to learn what all the commotion is about.
Because of MMT's growing popularity it might be helpful to present a quick start guide so beginners can get up to speed and understand some of its fundamental elements. As a starting point here are some basics of Modern Monetary Theory (MMT) compared to some other principles of money and economics that might be considered conventional wisdom or old school wisdom.
1. What is money?
Modern Monetary Theory: Money is a debt or IOU of the state
[The] history of money makes several important points. First, the monetary system did not start with some commodities used as media of exchange, evolving progressively toward precious metals, coins, paper money, and finally credits on books and computers. Credit came first and coins, late comers in the list of monetary instruments, are never pure assets but are always debt instruments — IOUs that happen to be stamped on metal…
Monetary instruments are never commodities, rather they are always debts, IOUs, denominated in the socially recognized unit of account. Some of these monetary instruments circulate as "money things" among third parties, but even "money things" are always debts — whether they happen to take a physical form such as a gold coin or green paper note.
— Money: An Alternate Story by Eric Tymoigne and L. Randall Wray
"money is a creature of law", and, because the state is "guardian of the law", money is a creature of the state. As Keynes stated:
"the Age of Chartalist or State Money was reached when the State claimed the right to declare what thing should answer as money to the current money-of-account… (Keynes 1930)…
— Chartalism, Stage of Banking, and Liquidity Preference by Eric Tymoigne
John Maynard Keynes in his 1930, Treatise on Money, also stated: "Today all civilized money is, beyond the possibility of dispute, chartalist."
Old School Wisdom:
Money is essentially a device for carrying on business transactions, a mere satellite of commodities, a servant of the processes in the world of goods.
— Joseph Schumpeter, Schumpeter on money, banking and finance… by A. Festre and E. Nasica
Conventional Wisdom:
Money is any object or record, that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context.
— Wikipedia
2. Why is money needed?
MMT: Money is needed in order to pay taxes
Money is created by government spending (or by bank loans, which create deposits) Taxes serve to make us want that money – we need it in order to pay taxes.
— The 7 Deadly Frauds of Economic Policy, Warren Mosler
The inordinate focus of [other] economists on coins (and especially on government-issued coins), market exchange and precious metals, then appears to be misplaced. The key is debt, and specifically, the ability of the state to impose a tax debt on its subjects; once it has done this, it can choose the form in which subjects can 'pay' the tax. While governments could in theory require payment in the form of all the goods and services it requires, this would be quite cumbersome. Thus it becomes instead a debtor to obtain what it requires, and issues a token (hazelwood tally or coin) to indicated the amount of its indebtedness; it then accepts its own token in payment to retire tax liabilities. Certainly its tokens can also be used as a medium of exchange (and means of debt settlement among private individuals), but this derives from its ability to impose taxes and its willingness to accept its tokens, and indeed is necessitated by imposition of the tax (if on has a tax liability but is not a creditor of the Crown, one must offer things for sale to obtain the Crown's tokens).
— Money: An Alternate Story by Eric Tymoigne and L. Randall Wray
Money, in [the Chartalist] view, derives from obligations (fines, fees, tribute, taxes) imposed by authority; this authority then "spends" by issuing physical representations of its own debts (tallies, notes) demanded by those who are obligated to pay "taxes" to the authority. Once one is indebted to the crown, one must obtain the means of payment accepted by the crown. One can go directly to the crown, offering goods or services to obtain the crown's tallies—or one can turn to others who have obtained the crown's tallies, by engaging in "market activity" or by becoming indebted to them. Indeed, "market activity" follows (and follows from) imposition of obligations to pay fees, fines, and taxes in money form.
— A Chartalist Critique of John Locke's Theory of Property, Accumulation and Money… by Bell, Henry, and Wray
Conventional Wisdom:
Money is needed as a medium of exchange, a unit of account, and a store of value.
Old School Wisdom:
Money is needed because it could "excite the industry of mankind."
— Thomas Hume, Hume, Money and Civilization… by C. George Caffettzis
Old School Tony Montoya, aka Scarface, Wisdom: money is needed for doing business, settling debts, and emergency situations…
Hector the Toad: So, you got the money?
Tony Montana: Yep. You got the stuff?
Hector the Toad: Sure I have the stuff. I don't have it with me here right now. I have it close by.
Tony Montana: Oh… well I don't have the money either. I have it close by too.
Hector the Toad: Where? Down in your car?
Tony Montana: [lying] Uh… no. Not in the car.
Hector the Toad: No?
Tony Montana: What about you? Where do you keep your stuff?
Hector the Toad: Not far.
Tony Montana: I ain't getting the money unless I see the stuff first.
Hector the Toad: No, no. First the money, then the stuff.
Tony Montana: [after a long tense pause] Okay. You want me to come in, and we start over again?
Hector the Toad: [changing the subject] Where are you from, Tony?
Tony Montana: [getting angry and supicious] What the f**k difference does that make on where I'm from?
Hector the Toad: Cona, Tony. I'm just asking just so I know who I'm doing business with.
Tony Montana: Well, you can know about me when you stop f**king around and start doing business with me, Hector!
Hector the Toad: You want to give me the cash, or do I kill your brother first, before I kill you?
Tony Montana: Why don't you try sticking your head up your ass? See if it fits.
Frank Lopez: [pleading] Please Tony, don't kill me. Please, give me one more chance. I give you $10 million. $10 million! All of it, you can have the whole $10 million. I give you $10 million. I give you all $10 million just to let me go. Come on, Tony, $10 million. It's in a vault in Spain, we get on a plane and it's all yours. That's $10 million just to spare me.
— dialog from Scarface, the movie
Note: The comment about the $10 million stashed in a Spanish vault highlights a small chink in MMT's armor. If the taxing power of the sovereign state is sabotaged, or there is widespread tax evasion, then MMT falls apart.
3. Where does money come from?
MMT: The government just credits accounts
Modern money comes from "nowhere."
— Bill Mitchell
Conventional Wisdom: Money comes from the government printing currency and making it legal tender.
4. Government Spending: any limits?
MMT: government spending is not constrained.
a sovereign government can always spend what it wants. The Japanese government, with the highest debt ratio by far (190 per cent or so) has exactly the same capacity to spend as the Australian government which has a public debt ratio around 18 per cent (last time I looked). Both have an unlimited financial capacity to spend.
That is not the same thing as saying they should spend in an unlimited fashion. Clearly they should run deficits sufficient to close the non-government spending gap. That should be the only fiscal rule they obey.
— Bill Mitchell
Conventional Wisdom: government spending should be constrained
One option to ensure that we begin to get our fiscal house in order is a balanced budget amendment to the Constitution. I have no doubt that my Republican colleagues will overwhelmingly support this common sense measure and I urge Democrats to as well in order to get our fiscal house in order.
— House Majority Leader Eric Cantor (R-VA), June 23th, 2010
5. What is Quantitative Easing?
MMT: It is an asset swap. It is not "printing money" and it is not a very good anti-recession strategy.
Quantitative easing merely involves the central bank buying bonds (or other bank assets) in exchange for deposits made by the central bank in the commercial banking system – that is, crediting their reserve accounts… So quantitative easing is really just an accounting adjustment in the various accounts to reflect the asset exchange. The commercial banks get a new deposit (central bank funds) and they reduce their holdings of the asset they sell…
Invoking the "evil-sounding" printing money terminology to describe this practice is thus very misleading – and probably deliberately so. All transactions between the Government sector (Treasury and Central Bank) and the non-government sector involve the creation and destruction of net financial assets denominated in the currency of issue. Typically, when the Government buys something from the Non-government sector they just credit a bank account somewhere – that is, numbers denoting the size of the transaction appear electronically in the banking system.
It is inappropriate to call this process – "printing money". Commentators who use this nomenclature do so because they know it sounds bad! The orthodox (neo-liberal) economics approach uses the "printing money" term as equivalent to "inflationary expansion". If they understood how the modern monetary system actually worked they would never be so crass…
So I don't think quantitative easing is a sensible anti-recession strategy. The fact that governments are using it now just reflects the neo-liberal bias towards monetary policy over fiscal policy…
— Bill Mitchell
Conventional Wisdom: Quantitative Easing is "money printing"
James Grant, editor of Grant's Interest Rate Observer, says Quantitative Easing Is Just Money Printing
6. What is the view on personal debt?
MMT: personal debt is not dangerous
Americans today have too much personal debt. False. Private debt adds money to our economy. Though bankruptcies have increased lately, that is due more to the liberalization of bankruptcy laws, rather than to economics. Despite rising debt and bankruptcies, our economy has continued to grow. The evidence is that high private debt has had no negative effect on our economy as a whole, though it can be a problem for any individual.
— Free Money: Plan for Prosperity ©2005 (pg 154), by Rodger Malcolm Mitchell
Note: Rodger Mitchell is an MMT extremist. He calls his brand of MMT, "Monetary Sovereignty". Not all of his views may be in sync with mainstream MMT doctrine.
Conventional Wisdom: too much debt is dangerous
The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years of the last decade. Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment.
— Paul Krugman, NY Times
Old School Wisdom: debt is always dangerous
"Neither a borrower, nor a lender be"
— Polonius speaking in Hamlet, by William Shakespeare
7. What is the view on foreign trade?
MMT: Exporters please just take some more fiat money and everyone will be fat and happy!
Think of all those cars Japan sold to us for under $2,000 years ago. They've been holding those dollars in their savings accounts at the Fed (they own U.S. Treasury securities), and if they now would want to spend those dollars, they would probably have to pay in excess of $20,000 per car to buy cars from us. What can they do about the higher prices? Call the manager and complain? They've traded millions of perfectly good cars to us in exchange for credit balances on the Fed's books that can buy only what we allow them to buy…
We are not dependent on China to buy our securities or in any way fund our spending. Here's what's really going on: Domestic credit creation is funding foreign savings…
Assume you live in the U.S. and decide to buy a car made in China. You go to a U.S. bank, get accepted for a loan and spend the funds on the car. You exchanged the borrowed funds for the car, the Chinese car company has a deposit in the bank and the bank has a loan to you and a deposit belonging to the Chinese car company on their books. First, all parties are "happy." You would rather have the car than the funds, or you would not have bought it, so you are happy. The Chinese car company would rather have the funds than the car, or they would not have sold it, so they are happy. The bank wants loans and deposits, or it wouldn't have made the loan, so it's happy.
There is no "imbalance." Everyone is sitting fat and happy…
— Warren Mosler, The 7 Deadly Frauds of Economic Policy
Old School Wisdom: Trade arrangements will break down if a currency is debased
"Sorry paleface, Chief say your wampum is no good. We want steel knives and fire-water for our beaver pelts." — American Indian reaction after Dutch colonists debase wampum in the 1600′s
83 Responses to "MMT history and overview"
Art Says:
August 4th, 2011 at 1:21 pm
Good stuff!!!
But Dr. Doom* says that MMT = debt monetization which is always and everywhere hyperinflationary. So that whole mechanical thing where sovereign debt is just a previously de-monetized govt liability…that couldn't possibly be right…could it??? :)
* I'm thinking of Roubini in his recent joint TV appearance with Randy, but it could also be Marc Faber or even the Fantastic Four's arch-nemesis. I think they'd all agree. I also like to think that if you asked whether the 'monetization' argument only holds up for external currency debt and only in certain circumstances, each of them would let rip with an evil-genius belly-laugh and then disappear in a cloud of pyrotechnics.]
WARREN MOSLER Reply:
August 4th, 2011 at 6:03 pm
too bad we can't have enough demand to keep unemployment under 16% without hyperinflation…
jaymaster Says:
August 4th, 2011 at 1:43 pm
OK, this one deserves a permanent bookmark!
PJ Pierre Says:
August 4th, 2011 at 2:11 pm
Do we have any idea who the author is?
Clonal Antibody Reply:
August 4th, 2011 at 7:27 pm
From its inception, Johnsville has been an anonymous blog.
JKH Says:
August 4th, 2011 at 2:56 pm
Very good.
The opening paragraph could have been written by Matt Taibbi of Rolling Stone (he of vampire squid fame).
beowulf Says:
August 4th, 2011 at 3:02 pm
Rather, Modern Monetary Theory had a hot, steamy, Rummy induced, immaculate conception as its creator, Warren Mosler, has stated
If "Johnsville" is going to go out of his way to offend Catholics, he might as well get his metaphors right. The event he's referencing is called the Annunciation of the Lord. The Immaculate Conception refers to Jesus's mother Mary being born without original sin.
ESM Reply:
August 4th, 2011 at 3:04 pm
Correct! It's a common "misconception."
Ramanan Says:
August 4th, 2011 at 3:34 pm
"Americans today have too much personal debt. False. Private debt adds money to our economy. Though bankruptcies have increased lately, that is due more to the liberalization of bankruptcy laws, rather than to economics. Despite rising debt and bankruptcies, our economy has continued to grow. The evidence is that high private debt has had no negative effect on our economy as a whole, though it can be a problem for any individual.
— Free Money: Plan for Prosperity ©2005 (pg 154), by Rodger Malcolm Mitchell"
Oops .. wrong call!
Does he still believe that ?
"Emotions run hot in the current economic environment, especially on the internet. In some cases the energetic online promoting of MMT has turned into passive aggressive hectoring, hazing, name calling, badgering, and belittling. So be warned, if you write some economic analysis online that disagrees with MMT doctrine you might find yourself attacked and stung by a swarm of MMTers. If you are an economic "expert" and you do not understand monetary basics you may also get mounted on an MMT wall of shame."
… Oops!
"Everyone is sitting fat and happy"
Really ?
studentee Reply:
August 4th, 2011 at 6:30 pm
def agree about the private debt thing, ramanan. mmt's suspicion of private debt is one of its attracting points and should be stressed
Tom Hickey Reply:
August 4th, 2011 at 7:41 pm
Many overlook the Minskyian aspect of MMT. It is central.
WARREN MOSLER Reply:
August 5th, 2011 at 4:21 pm
it's just that the private sector is pro cyclical, right?
Adam (ak) Reply:
August 4th, 2011 at 6:58 pm
In my opinion are perfectly right here pointing out that the denial of debt deleveraging makes this presentation of the theory seriously flawed. NB Bill Mitchell repeated many times that private debt deleveraging is a serious issue.
Obviously financing consumption and asset speculation by rising debt seemed to work very well (it created "great moderation") but at some point of time private debt has to be repaid and its aggregate cannot keep rising forever.
The mechanism is very simple – so simple that even Paul Krugman doesn't understand it. He thought that private debt was a distributional issue (agent A borrows savings from B through the banking system).
Nothing more wrong can be said.
A borrows from the bank, spends money buying something from B and then money stays as a deposit on the B's deposit account.
If B sold an existing asset then the impact on aggregate demand can be only indirect (by different spending propensities out of the wealth of A and B)
On the other hand if B was a developer and sold a new house then the new credit increased the aggregate demand.
That's right private (horizontal) money creation works in the same way as extra government spending – the multiplier might be slightly different but the spending multiplier theory is perfectly applicable here.
Spending = d(Money)/dt either a flow of money or new money creation.
Spending on housing was accounted for as investment in the GDP NIPA framework.
Interest payments only lead to redistribution of income but what about the debt repayment? Yes it leads to credit money destruction and blows a hole in the aggregate demand. dM/dt becomes less than zero. That's why you have so high S (savings). Here the only government spending can help to compensate for (S-I) getting positive – that's why I believe that Functional Finance (call it MMT) is the ONLY way forward (I had recently a discussion with an Austrian guy who believed that the savers can be persuaded to dis-save and invest out of their savings – but I don't believe anyone sane will invest in expanding productive capacities if the economy is in recession).
US economy is in debt deleveraging phase due to the consequences of the housing bubble. Please explain it to Paul Krugman and he'll most likely drop his reservations to MMT.
Also I strongly object that MMT is a new theory. I agree that Warren's presentation of the monetary system (and work of prof Randy Wray) is an refreshing eye-opener but almost everything about the aggregate demand was present in work of Michal Kalecki and his followers (prof Kazimierz Laski living in Austria).
Please read the following and then pass the paper to your local member of Congress, mentioning that this is the aggregate demand theory most likely still used in China to design policies which may eventually lead them to out-compete with your country:
"Kalecki required deficit spending whenever private investment did not fill to a satisfactory degree the deflationary gap between SP* and actual SP as a main instrument for better utilization of capacity and higher employment."
"As a matter of definition, 'private savings' SP properly defined) equal 'offsets to private savings' OSP (Burchardt, 1994, p. 20) such as private investment gross private capital formation), denoted IP, deficit spending (general Government expenditure G minus net current revenues, including net social security payments, T), denoted D and trade balance (exports of goods and nfs X minus corresponding imports M), denoted E. A major economic problem is the question what determines what: do 'offsets to savings' determine private savings or vice versa? This very question seemed to be definitely resolved at the time when The Economics of Full Employment was published and many years thereafter,
giving priority to OSP and to private investment IP, by far the most important component of it. But since the oil crises and the surge of inflation in the 1970s, a new paradigm in economic theory has prevailed. This new paradigm has not been quite new. Mainstream economics has returned gradually to the old laissez-faire competition theory which the theory of effective demand had seemed to substitute for good. According to the new-old theory, there are savings SP which do determine offsetting expenditures IP + D + E. As far as unemployment is concerned, the new-old theory has returned to the view that it is mainly caused by real wages being too high and by lacking flexibility of the labour force.
The policy conclusions derived from the new-old paradigm were contrary to the recommendations of the theory of effective demand given in, for instance, the famous
paper of Michal Kalecki (1944), 'Three Ways to Full Employment'. Those very conclusions have been, in the opinion of the present author, mostly responsible for the high unemployment in Germany and the EU in the last quarter of the century and especially in the 1990s."
(The paper is from 2000 and the analysis is based on the German case).
Please check out more papers written by prof Laski. He is the one who got it right in 1989 in Poland – not Jeffrey Sachs or George Soros. It's so sad nobody listened to him in Poland then… but you have another chance.
Adam2 Reply:
August 4th, 2011 at 7:37 pm
@Adam (ak),
Hi Adam (ak), It was actually you at Steve Keen's site that pointed me this way. I remember you calling it Neo-Chartalism.
WARREN MOSLER Reply:
August 5th, 2011 at 4:19 pm
thanks! good see the K had it right. did he recognize that adherence to a gold standard from time to time took away the full employment option?
Mario Reply:
August 4th, 2011 at 7:12 pm
I actually agree with you on this one Ramanan. That one struck me as odd as well b/c it's not exactly accurate in MMT as I know it. However I see that Roger was trying to get across the point that private debt in and of itself is not bad and can stir the economy and be positive in that regard. Also there's a big difference between the private sector debts on mortgages and cruises and cars, etc. and the financial sector debt that really toppled things over. I DON'T think Roger was talking about that type of private sector debt and that is a worthy distinction to be made I think.
Tom Hickey Reply:
August 4th, 2011 at 7:45 pm
domestic private sector debt is debt due to investment and debt due to consumption. Big difference. Consumption debt is generally unsustainable when it outruns income. Prudent investment debt pays itself off. It not only the quantity of private debt but also the quality. Minsky's distinction among hedge, speculative and ponzi finance must be taken into account.
Mario Reply:
August 4th, 2011 at 9:42 pm
absolutely. I'm just trying to quantify roger's comment. I am not against debt per say and I know it can be a way to stimulate the economy, but of course at unsustainable levels it is well…unsustainable.
Mario Reply:
August 4th, 2011 at 7:15 pm
plus the fact that the bailouts occurred which only skewed and mutated things even further in regards to those debt issues (of course in favor of wall st. not the people). The bailouts, nor the financial sector's risk schemes didn't have to happen and if they didn't I think it's possible that our economy might not be so bad off today…even with mortgages and private debt where it was. I don't know for sure, but I'm just putting that idea out there.
Rodger Malcolm Mitchell Says:
August 4th, 2011 at 3:34 pm
I laugh, because all of us, whether identified with MMT or Monetary Sovereignty or neo-chartism or some other related "ism," continually attempt to write papers, long and short, we hope will clarify in people's minds what the facts are.
And we continually fail.
Warren and I have focused on the "everyman's" language versions. Randy Wray has taken the professorial approach, and a bunch of others are one or the other, or in between.
And we continually fail.
I think it no longer is a question of whether people can understand; it's a question of why they don't want to understand. And the reason, I suspect, is that the thought leaders, those Nobel winning professors from U. of C., Harvard, Stanford et al simply have too much ego and too much reputation invested in the old (pre-1971) economics, and cannot bring themselves to admit, "I have been wrong for the past 40 years."
So they keep preaching the same old nonsense, hoping that reality will change and make them right once again. Hey, who knows. Maybe we'll go back on a gold standard, and the old professors won't have to change their lesson plans.
Meanwhile, I guess we'll keep doing what we're doing, until things get so bad, and people are so desperate, they'll look for new answers.
By the way, a month ago I posted the blog, "Why there will be a full blown depression in 2012." That's my story and I'm sticking to it.
Rodger Malcolm Mitchell
Matt Franko Reply:
August 4th, 2011 at 3:59 pm
@Rodger Malcolm Mitchell, If it makes a difference you and the others didn't fail with me Rodger! Resp, (And thanks btw!)
TC Reply:
August 4th, 2011 at 4:17 pm
You didn't fail with me either.
Thank you for your years of work.
In 2007, I had never heard of Tax driven demand for a currency, or MMT. I was introduced to it by someone who knows Warren through the least likely circumstances imaginable.
MMT is gaining mindshare at exponential rates.
It convinced Cullen Roche and Yves Smith. These people are hugely MMT friendly and have gigantic megaphones.
The Trillion Dollar coin is MMT. It made the front page of CNN. Mike Norman is on fox and other TV outlets.
It convinced this the mystery author Johnsonville as being serious enough to write oh 10,000 words on it. And follow the debate with the care of a parent.
We're at the "violently opposed", but moving to "self evident" quite quickly….because of your decades of work.
WARREN MOSLER Reply:
August 4th, 2011 at 6:06 pm
beowulf Reply:
August 4th, 2011 at 11:40 pm
Yes, the window is closing to re-define MMT as "Mosler Monetary Theory". :o)
Peter D Reply:
August 5th, 2011 at 12:10 am
No! Mosler Monetary TRUTH!
I hope to see Warren awarded the nobel Prize one day. Not that the prize deserves it :)
WARREN MOSLER Reply:
August 5th, 2011 at 4:26 pm
thanks, guys!
Peter D Reply:
August 5th, 2011 at 12:19 am
I was explaining MMT to my boss the other day – gently, so to speak. He was floored, I could tell. The guy is supposed to be the head macro strategist, and he doesn't know that govt defict=non-govt surplus! I had to show him some "proof" from the internet.
Sergei Reply:
August 5th, 2011 at 12:47 am
Peter D: He was floored, I could tell. The guy is supposed to be the head macro strategist, and he doesn't know that govt defict=non-govt surplus! I had to show him some "proof" from the internet.
Nothing new. I have it all the time. About a week ago I had a chat with our macro guy on the topic of unrelated to MMT at all (we talked about projections of loans to deposit ratio). So he thought that when people start saving/investing and buy stocks or something, then deposits disappear. He was shocked when I told him that deposits disappear when banks sell their *own* bonds and in this sense loan to deposit ratio is quite meaningless. His argument then was that everybody is looking at it.
Well at least I gave him a couple of hard minutes.
jaymaster Reply:
August 4th, 2011 at 4:54 pm
I'm becoming more convinced by the day that many economists these days are first and foremost, political hacks and sellouts.
As Warren says often, many of the elites he meets with "get it", yet they never utter a peep about it in public.
I'm thankful for guys like you (and the internet!), so we can bypass the traditional information gatekeepers and get the message to the masses.
I never heard about MMT until a couple years ago. But once I grasped the basics (thanks mostly to Warren's works), I put it into the category of self-evident truth, as in "we hold these truths to be self evident". It really is that basic.
Mario Reply:
August 4th, 2011 at 5:25 pm
agreed completely and I too have the same background.
3 cheers for Warren and company!!!! Hooray Hooray Hooray!!
We should all go drinking in the virgin islands!!! LOL
Mario Reply:
August 4th, 2011 at 5:28 pm
things rarely move at the pace we want them to…but move they do…especially for those with a steady focus and a willing heart. I think that can be said for all those present here. Of course there's also always the smug satisfaction of at least if nothing more understanding the reality of something and knowing that you do indeed sit on solid ground…building our house upon rock rather than sand as the proverbial saying goes. ;)
Stephan Reply:
August 6th, 2011 at 10:05 am
@Rodger Malcolm Mitchell >And we continually fail. Late to the game. Sorry for being the party spoiler. I'm not so enthusiastic like the other guys in this thread. But the above poses a good question: why do we continually fail?
I think this has to do with how mainstreet people perceive the world and what is "reality". Basically the story is best outlined in the book The Social Construction of Reality. Over and over I've experienced that people still live in gold-standard universe and once confronted with the opposite fall back to stories like Zimbabwe and Weimar (Especially in Germany. This Weimar episode seems to be part of the Genetic Code.)
Now in regard to the vested interest of celebrity economists the books offers also an explanation:
Universe-maintenance refers to specific procedures undertaken (often by an elite group) when the symbolic universe does not fulfill its purpose anymore (which is to legitimize the institutional structure in place). This happens, for example, in generational shifts, or when deviants create an internal movement against established institutions (against revolutions), or when a society is confronted with another society with a greatly different history and institutional structures. In primitive societies this happened through mythological systems and later on through theological thought and religions. Today, an extremely complex set of science has secularized universe-maintenance. Theoretical experts and schools of thought are competing for maintaining today's symbolic universe (e.g. it can be "scientifically proven" by economists that capitalism is better for everybody than communism).
Thus I believe it takes a major exogenous shock (like our mainstream friends prefer to say) to break the grip of the universe-maintenance elites on the public thinking. Maybe the depression Malcolm is talking about? I think it will be the imploding of the Eurozone and not because Greece defaults but because Germany will withdraw from the Eurozone.
John Zelnicker Says:
August 4th, 2011 at 3:56 pm
Well, I appreciate all the attempts by Rodger, Warren, Randy, Scott, et al, to educate the public (and me). I've only been studying MMT for about 4 months, but I'm trying to pass on my knowledge on an individual level. Today it was the gals at the local convenience store. Last week, my contractor working on my house. Before that, my wife. Eventually, we'll hit that 10 percent and MMT will become widely accepted.
Ken Simpson Says:
August 4th, 2011 at 4:48 pm
Hey guys,
You conviced me, a retired proletarian. Saturday evening at a cocktail party I demolished a PH.D. in economics with MMT. All the young people as where they could get more. I sent them to Warren and Billy's websites. Thank you for all your work.
WARREN MOSLER Reply:
August 4th, 2011 at 5:41 pm
:) !!!
Ed Rombach Says:
August 4th, 2011 at 5:24 pm
Did you say nutshell?
MamMoTh Reply:
August 4th, 2011 at 7:05 pm
@Ed Rombach, the size of a nutshell is a political choice.
Clonal Antibody Says:
August 4th, 2011 at 5:33 pm
Johnsville also has an article ontThe Trillion Dollar Coin.
Richard from Canada Says:
August 4th, 2011 at 5:56 pm
So where do the social credit principles from the 1930s play into all of this.
It seems like social credit was leading edge MMT even suggesting the government create money and give it directly to consumers to spend as opposed to government itself !!!!
macrosam Says:
August 4th, 2011 at 8:15 pm
You guys didn't fail. You have MMTers holding significant positions on Wall Street whom Warren is aware of and they have promulgated MMT in their own way to their clients.
hamish Says:
August 4th, 2011 at 9:25 pm
A thought on goldbugs obsession with gold as money. Do you think it's a case of confusing the medium with the message?
Gold for so long being the material used to represent money, it's physical properties making it unusually well suited to the role – rare to prevent easy counterfeiting, easily formed, and literally lasts forever without degrading, yet strangely a bit useless as a commodity (to soft to make good knives or many other tools)So because it held this role for so much of our history, we've ended up confusing it with money itself, maybe the gold standard itself was a result of that confusion.
Mario Reply:
August 4th, 2011 at 9:40 pm
good points. Personally I think all gold bugs were just dwarves that mined and stored gold pieces in a past life and still have that memory. ;)
hamish Reply:
August 4th, 2011 at 11:19 pm
It was reading posts by some goldbug Austrian types, and listening to commentators like Schiff & Faber, that led me to looking up some economic history from gold standard days. This made me question the whole idea, because the history suggests that a gold standard isn't a solution. There were plenty of boom bust cycles on that standard, inflation spikes, as well as some very nasty recessions. If anything it was a more volatile period than now. So these days I tend to view gold standard proponents as puritanical zealots.
Mario Reply:
August 5th, 2011 at 3:07 pm
yup. It's all right there in the facts and data…if only people just took a look instead of living in ideologically refracted ideas of what the facts appear to be.
As Dylan said, "you don't need a weather man to know which way the wind blows!"
WARREN MOSLER Reply:
August 5th, 2011 at 4:24 pm
they want the currency to also be an investment vehicle
zanon Reply:
August 5th, 2011 at 4:37 pm
@WARREN MOSLER, they just want it to NOT lose value (ie. it value not be inflated away by spend thrift government).
Or, if gold viewed as % claim on US output, then as output go up, value go up.
Or something.
Gold is "money" to degree that, in nash equilibrium, it will be money
Mario Reply:
August 5th, 2011 at 6:02 pm
"Gold is "money" to degree that, in nash equilibrium, it will be money"
exactly…and nash equil. also says that is an unsustainable venture simply b/c once your put between a rock and a hard place…you always choose for numero uno (aka liquidation and serious spikes in currency/economy).
Ming33 Says:
August 5th, 2011 at 1:20 am
Thank you for the re-post Warren. I've been visiting your blog and the other MMT blogs for a couple of months. Rodger threw me off of his blog awhile ago. He scares me. In fact, all the MMTers scared the living Grover Norquist out of me when I first read your ideas. I had to read "The 7 Deadly Frauds of Economic Policy" a couple of times before I could wrap my brain around it.
I am still a little "weak-kneed" when it comes to fully embracing MMT, but I'll keep reading because your MMT take on things seems to be the one that makes the most sense. Also, I'd like to just once ace a weekly Bill Mitchell MMT test.
I think you have a tough road ahead of you to advance MMT over the likes of Grover Norquist and the balanced budget brigade.
I would love to watch you and Grover have a nice long debate on mainstream TV, a monetary cage fight.
Love visiting the Center of the Universe.
Clonal Antibody Reply:
August 5th, 2011 at 10:58 am
Thank you for doing the long posts on MMT, and also the Trillion Dollar Coin. After spending over a year looking at MMT, I have come to the conclusion, that it is the most accurate representation of the monetary system today. The monetary system is an extremely powerful tool, and can do good for society, or it can enrich the few and impoverish the many. Thus in my estimation, the widespread knowledge of hoe the system works is a good thing, and may allow it to be used to do good for our society.
If you remember what Warren wrote in the 7DIF — he went to Don Rumsfeld, and then to Art Laffer when he discovered how the money system worked. Art Laffer was very influential in shaping the thoughts of Richard (Deficits do not Matter) Cheney. Think also of various comments by Bush 41 and Bush 43 on "Voodoo Economics" — my personal belief is that these referred to MMT ideas. The time period following this event was greatly influenced by the deregulation of the banking system. This, coupled with the new understanding of money led to large amounts of wealth being made by a few.
Again, my belief is that MMT without strict financial regulation will automatically lead to a transfer of income and wealth from the bottom to the top. This happens not necessarily from a venal use of the monetary system, but rather from the inherent nature of free unregulated markets and the existence of financial rent seeking via interest payments to the financiers.
Thus, your concerns while, likely very valid, should not lead us to a denial of how the system really works. A good understanding of the monetary system on part of the general public and the policy makers, may bring about a better society.
WARREN MOSLER Reply:
August 5th, 2011 at 4:31 pm
did meet again with grover last summer. i signed his no tax pledge pointing out it had a contradiction/error in it, which i corrected in an mmt friendly way, and signed it. so he had me speak for a few minutes at his meeting chock full of maybe 100 active politicians running for office, and i told them that cutting waste and fraud and unnecessary spending is good, but that taxes then have to be cut that much more, to make the deficit larger. that TEA stood for taxed enough already, and that we are far more overtaxed than they realized, as taxes are more powerful than spending, and so should be a lot less than spending, and that as everyone at the cbo knows, the only source of net dollar savings is taxing a lot less than spending. the big G nodded repeatedly in approval.
Clonal Antibody Reply:
August 5th, 2011 at 5:15 pm
what I find disconcerting about the GrNor crowd, is that they conflate "high taxation" with "high marginal tax rates." It appears to me, that what is important is "total tax revenue" as a percentage of GDP. This has remained remarkably consistent over the years, despite the reduction in top marginal rates. However the lower top rates have definitely resulted in a dramatic increase in wealth/income inequality.
In my view, high marginal tax rates encourage the wealthy to be "philanthropists" and highly paid managers to be more caring for the well being of their employees. The psychology being – "If I can't keep it, I would rather give it away. I don't want my hard work to be taxed" (and of course, in the MMT paradigm, taxed income is only destroyed – so I would not like my hard work to be destroyed!) Higher marginal tax rates could well, and probably will result in a situation, where total tax revenues decline as a percentage of GDP, AND at the same time, the wealth/income equality increases.
Mario Reply:
August 5th, 2011 at 6:10 pm
I agree and a worthy distinction that history seems to play out for us as accurate. Many times people like to take MACRO theories (levels of aggregate demand for example) and apply them to their MICRO situation (less taxes for ME!)…ummmm it doesn't necessarily work like that!!!! LOL Once again the problem is the people calling the shots NOT the system itself.
WARREN MOSLER Reply:
August 6th, 2011 at 3:28 am
And is public purpose served by having the wealthy decide which charities are worthy?
Clonal Antibody Reply:
August 6th, 2011 at 10:49 am
Of course there are rules and regulations as to what charities count as tax deductible contributions. Those laws exist currently, and can always be modified to aid "Public Purpose" Generally, the wealthy start charitable foundations, that are then run by a combination of professional staff and heirs. But the foundations then have to operate within the purview of the laws that make certain that they are acting within "Public Purpose"
ESM Reply:
August 6th, 2011 at 12:39 pm
Charitable giving is a spending decision. Whether it is investment or consumption spending depends on the charity.
By giving a tax deduction, the government is effectively subsidizing such spending.
Not sure if that's the best public policy, especially considering what qualifies as a 501(c)(3) organization these days (e.g. religious organizations, museums, concert halls, Harvard??).
Also, I doubt that the wealthy bore a higher tax burden in the past, even though the top tax rates were higher. There were so many loopholes and deductions pre-1986, that very little income was subject to the top rates.
The growth in inequality is most likely due to advancing technology and globalization, which allows greater leverage for entrepreneurs and people at the top of their profession. Thirty years ago, I don't think it was possible for somebody to make billions of dollars writing children's books, for example.
Mario Reply:
August 7th, 2011 at 7:36 pm
It's actually better for the economy for those dollars to go to charitable foundations instead of savings banks, bonds, or the US government in taxes anyway. It creates more work in the private sector since non-profits are actually private sector entities, not public sector entities. By definition they are outside of "public purpose" and so the point is moot.
I don't care what foundations people donate to. That's the choices of the private sector and that culture, etc.
Political non-profits or PAC's are not tax deductible for this very reason, so the public purpose is protected, again making the point moot.
Mario Reply:
August 7th, 2011 at 7:44 pm
"Also, I doubt that the wealthy bore a higher tax burden in the past, even though the top tax rates were higher. There were so many loopholes and deductions pre-1986, that very little income was subject to the top rates."
that's okay. The money is being "driven out" and that's the only thing that matters. If they have to buy museums, etc. to do that then great. I don't care so much that the money goes to the government. I only care that it leaves the hands of the wealthiest such that they must "stay hungry" and not get lazy and start getting ideas.
Idle time is the devil's play thing as they say.
Ming33 Reply:
August 6th, 2011 at 12:11 am
Wow, great story. I am surprised, but I would not have expected Grover to be so supportive. His ATR group believes that the answer to the question of how much the government should be spending should categorically be "less than it currently does." I thought he was a "spend less, balance the budget, grow more" guy, who has said the deficit is a "measure of our failure," which I took to be anti-MMT. I guess the pure politics of lower taxes makes for interesting bedfellows.
Thanks. I agree completely with your conclusion that MMT "is the most accurate representation of the monetary system today." As a newbie I have a lot to learn and I am again embarrassed by my score on Bill Mitchell's Saturday Quiz.
MMT looks like it will be the last man standing when all the other economic theories and political forces play themselves out. Hopefully, we're not too far gone by then.
Ryan Schilling Says:
August 5th, 2011 at 11:49 am
Can someone help me resolve this? I'm trying to understand the difference between MMT and Krugman's positions on personal debt, and I'm not quite seeing the difference. In particular:
Mitchell: "The evidence is that high private debt has had no negative effect on our economy as a whole, though it can be a problem for any individual."
Krugman: "The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years of the last decade. Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment."
Mitchell concedes that private debt can be a problem for the individual. Krugman says that private debt problems for individuals is diminishing demand in the aggregate. I'm not sure how these views are incompatible or incongruous?
Does MMT say that high private debt levels can never result in less aggregate consumer demand?
Neil Wilson Reply:
August 5th, 2011 at 2:09 pm
The problem is that everybody is spent up. It is not the existing debt that is the problem. It's the lack of new debt that is the problem. The lack of new debt means that the old debt owners can't earn enough to pay back the debt.
Without outside support the private economy will then fall into a debt deflation spiral which would cause a massive cascade of default and destruction crippling the real economy.
So they are both right from their point of view. If the Fiat part of the economy was giving the support to allow the overleveraging in the Credit part of the economy to resolve itself there wouldn't be a problem.
However it isn't so there is a drag on demand due to the debt deflation dynamics.
Ramanan Reply:
August 5th, 2011 at 2:18 pm
I believe (as pointed out by Johnsville) Rodger Mitchell's opinions are different from MMT.
"No negative effect" was a bit of an overkill. Private debt helps creating demand in the economy. However, private sector deficit is an imbalance and continuous deficits keeps increasing the sector's indebtedness and needs to be corrected at some stage by policy or else it can have very negative effects as we have all seen.
WARREN MOSLER Reply:
August 5th, 2011 at 4:36 pm
the difference is that when aggregate demand collapses, Bill is quick with a fiscal adjustment, with no concern about solvency,
while Paul, while he can be just as quick, remains wary of long term deficit concerns and loses the day to the hawks.
So the problem for Paul was the collapse that followed, not the debt per se.
Mario Reply:
August 5th, 2011 at 6:05 pm
"while Paul, while he can be just as quick, remains wary of long term deficit concerns and loses the day to the hawks."
exactly and the underlying sub-narrative to that is that Paul looks "irresponsible" and "reckless" while the hawks look like smart businessmen and calculating investors. Truly all that glitters is not gold.
ESM Reply:
August 5th, 2011 at 6:19 pm
Here's a little reminder from March 2003 of how, … uh, flexible (shall we say), Paul Krugman can be with his economic pronouncements:
Depends a lot upon who's in the White House and whether they're cutting taxes or increasing spending.
Mario Reply:
August 5th, 2011 at 8:04 pm
yup funny still all the doom and gloom nonsense. funny to hear him talk about crazy interest rates and the deficit in 2003. Things never really change eh?!?! LOL ;)
Of course I'm not so sure he'd be saying much differently if the big O threw us into war right now, but yes I agree and think that many economists' interpretations on both sides seem to sway depending on the political winds. So much for the science of economics. We need to let the parties go!!! Embrace practical politics!!!
pebird Says:
August 5th, 2011 at 11:58 am
That Mitchell Innes paper is a long and fruitful read. Highly recommended.
Historical and practical theory combined. I am passing this article on to friends – kind of a backdoor way to get some common context before we get into the details of MMT.
For some reason, when I bring up MMT, I get these long-winded opinions about money and what it is all about – this is from everyday people – I think I need to have a good elevator pitch on money before diving into MMT. This article helps a lot.
Tom Hickey Reply:
August 5th, 2011 at 12:48 pm
There is a page on this at the MMT Wiki, including links to the two articles of Innes here.
There's a lot of good stuff on the MMT Wiki already and it is open for editing by all. Just sign on. It's a handy reference meant to compile all things MMT in one place.
Thanks to selise for setting up the wiki and to all who have contributed. Check it out. It is for you.
MMT controls the liberal economic blogosphere « The Traders Crucible Says:
August 5th, 2011 at 1:34 pm
[...] Mitchell is worried about MMT not making a difference. Cheer up Roger! We appreciate the work and there are more people to help out now. Talking [...]
Links 08/11/2011 | Credit Writedowns Says:
August 11th, 2011 at 7:31 am
[...] The Center of the Universe » MMT history and overview [...]
rdm Says:
October 18th, 2011 at 12:29 pm
Either the above summary is incorrect, or MMT is incorrect.
MMT: personal debt is not dangerous
The foundation of MMT is its recognition of the importance of the government's power to tax, thereby creating a demand for its money
But if personal debt is not dangerous, everyone could use personal debt to pay their taxes, thus decoupling the money supply from the underlying value that supposedly is represented by that money.
WARREN MOSLER Reply:
October 18th, 2011 at 2:05 pm
and that's why I say the price level is a function of prices paid by govt when it spends and/or collateral demanded when it lends.
rdm Reply:
October 19th, 2011 at 10:03 am
@WARREN MOSLER, Yes, there can also be problems with government spending where too much volume on the government side reduces demand on the consumer side. But there are multiple failure modes here and it gets complicated.
John Horkin Says:
March 11th, 2013 at 6:12 am
Warren, I just saw this video of Beppe Grillo in 1998, the new independent party leader in Italy. The video starts off crude, and he is vulgar, but towards the end of the video (about 7:40 in), he brings up the very core of your MMT 7DIF proposals. He talks about the banking system being a problem because they will not put more money into the economy that the people need. That there is a scarcity and the people own the money, so the people should give themselves more money.
I thought I was listening to you. Have you reached out to him through Pablo? He seems to have been preaching your form of MMT for at least 15 years now.
Graziano Reply:
March 12th, 2013 at 1:58 pm
Hi John,
if you are talking about P.B. I personally do not think that it is a good idea…
It would be great! but he do not esteem a lot Grillo.
I'm also personally not 100% sure that Grillo is totally aware of how MMT works.
He is talking about lot of things… when the very simple way to follow is the
tax backed bonds!


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Naturno Pottery Market 2015
Naturno Pottery Market 2015
Naturno Pottery Market 05. - 07.06.2015For the 5th time, unique of its kind in the southern region of the Alps, the upcoming International Pottery Market of Naturns/Naturno is held from 05. to 07.06.2015.
The organizer, Naturns Aktiv, an association of the village merchants, has been busy for years, to develop new ideas and to organize innovative events. Naturns Aktiv has set out with the pottery market, in order to promote today's appreciation of this traditional craft.
The Naturno Pottery Market shall be a platform of high quality artistic exchange guided by the idea to bring together arts and crafts based on a strict selection of quality production.
We are open to both, to the artistic experiment and to technical achievements in the arts and crafts.
The Naturno Pottery Market offers to 45 selected potters from Italy and abroad the possibility of an international exchange of ideas. Exclusively freelance and entrepreneurial artists and potters, which are solely in charge of design, production and sale of their ceramic ware are invited and shall demonstrate their skills.
Furthermore, there will be exceptional events happing round about the market, such as an exhibition, a pottery award, live music gigs, a pottery studio with kiln, open to adults and children and more.
The Keramikmarkt Naturns/Naturno Pottery Market takes place every two years on the first week-end of june.
A jury assembled by the organizer decides on who participates.
The aim is, to bring together a selection of exhibitors coming from a wide range of craft fields and showing a high level of craft quality and artistic autonomy.
Keramik Aktiv Competition 2015 / Exhibition 2015During the market an exhibtion of selected objects will be presented in the Naturno Town Hall. The Keramikpreis Naturns Aktiv - 1.000 € is awarded. The jury will decide on whether the prize goes to one candidate or is split up among several. Only exhibitors of the market are liable to participate in the competition.
Furthermore, a purchase option of the winning object is granted to the commune of Naturno. The object submitted has to stay in the show until Sunday, 07.06., 6 p.m., and can only be picked up after the end of the market.
The most beautiful market booth 2015Furthermore, the jury will vote for the most beautiful market booth (judged by the presentation mode, not by pottery ware)
1. 1st prize - refund of exhibtor's fee
2. 2nd prize - recognition prize
3. 3rd prize - recognition prize
Market visitors will express their appreciation by voting for a Public Award (assessment of booth and products).
1. 1st prize - local products
2. 2nd prize - recognition prize
3. 3rd prize - recognition prize


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Why the big Wall Street banks are hurting
The 1% is worried, and not because of Occupy Wall Street. A lack of easy money to inflate a new bubble has brokers and big banks -- including B of A and Goldman Sachs -- losing money and doing layoffs.
By David Weidner for MarketWatch
The 1% is worried.
It's not the protesters drumming in Zuccotti Park or the chants of "shame" keeping them up at night at their Manhattan homes. It's a business model built to churn out easy money in a bubble that's sounding an alarm.
Wall Street is struggling with market forces that keep dragging its bubble machine back to the ground.
Oh, the banks have tried. On the retail front, Bank of America (BAC) said it would slap a $5 monthly fee on its debit card users. On the institutional front, MF Global ramped up leverage to buy risky European sovereign debt.
But B. of A. was beaten back by a consumer revolt and an industry rebellion. And MF Global chief executive Jon Corzine found out the hard way that leverage is still every bit as risky as it was in 2008.
Without easy money, Wall Street's apparatus for mining easy cash have gone quiet. Goldman Sachs Group (GS) lost money trading 21 days during the most recent quarter, the most since 2008. The firm even owned up to $100 million in losses on a single day.
Much of this is due to the evaporation of the huge spreads in fixed income that traders generally take advantage of. Treasurys and corporate and municipal bond spreads have narrowed to a sliver. This has hurt the so-called shadow bankers as well. Witness the 5.5% decline for the Hedge Fund Research Index in the third quarter.
Not even gold (GLD) has been gold since September, it's off 5%.
The industry-wide wipeout is a far cry from the boom-to-bust two decades we've just completed. We went from real estate boom to bust in the 1990s, technology boom to bust at the turn of the millennium, back to a real estate boom to bust in the last eight years.
Without an asset to inflate, Wall Street is bracing for a prolonged grind. The industry has shed more than 30,000 jobs. Bonuses are expected to decline 20% to 30% for those who still hold their jobs. Investors have seen bank stocks fall 27% since February, as measured by the KBW Philadelphia Bank Index, and brokerages tumble more than 30%, according to the Amex Securities Broker/Dealer Index.
Then, of course, there are the European banking ties to Wall Street. Banks including J.P. Morgan Chase & Co. (JPM) and Morgan Stanley (MS) have bent over backwards to show their holdings are relatively small.
But as many investors have figured out, direct holdings are one thing, indirect exposure through credit-default swaps and counterparty agreements are an equal, if not greater, threat. The market impact even if a bank or brokerage doesn't have any ties remains dangerous.
Europe, in many ways, is the next -- and perhaps not the last -- bubble to pop. China's exposure to its own growth and the hole it is digging itself into by buying U.S. debt and keeping its currency pegged to the dollar represents another.
If Wall Street could only find another bubble to inflate, those risks would mitigate. But the pump is broken.
Ultimately, Wall Street could survive if bankers and investors could accept moderate growth. If the Obama administration and Ben Bernanke at the Federal Reserve took an aggressive and clear stance on the housing market and interest rates, banks could map their future.
For now, it's still bubble economics. And the only thing for certain is that the air is coming out, not going in.
Related at MarketWatch.com:
Goldman wasnt able to invest in any bubbles so they are buying millions of barrels of oil and storing them on tanker ships in the North Sea. If you are wondering why oil is almost back to $100 just read this article and realize that the people in charge will shaft anyone to make easy money.
Cramer was talking about it last week. The manipulation is so bad that the market is acting contrary.
I agree with the poster that wishes all of the politicians, bankers, home builders, mortgage lenders, and all of the rest of the 1%, get tried for treason.
Financial terrorism.
Who do you think is educating the rest of the country on how to fight back against these crooks? WE THE PEOPLE OF THE 99%!!!!! We are the ones who started the trend of closing bank accounts with B of A, Chase, Wells Fargo. We are the ones informing people to join local union banks.
"But B. of A. was beaten back by a consumer revolt and an industry rebellion." YUP, THAT WAS US! We fought back and will continue to do so till these Schumcks are ALL GONE, along with their BS policies.
The 1% should be very worried, Americans from all walks of life has declared we are not taking it any more! We have seen the people we elected to represent us purchased and controlled by the corporations that you see every day on the board flashing the up or down quotes of their wealth. We have experienced the loss of our homes, signed away by people hired for $10.00 per hour, to sign the signature of the banks employee to the foreclosure notice. No negotiation with the owners to lower the payments or interest,then sell the home for thousands less. Why? they get to write it off as a loss of income. Our elected remains silent and do nothing.
We have experienced the loss of our retirement money because the very same banks have played with derivatives and lost out money not theirs. The elected remains silent and do nothing.
The Corporations have packed up and moved overseas for a $2.00 a day labor force, Then send the goods (much of which is defected) back to the U.S. and expect us to purchase it with our now minimum labor wages from two or three jobs we are working.
Our children and other relatives are fighting some dying, some losing their sight, arms, legs, in Iraq, Afghanistan while here in our congress the people we elected are taking "donations", stock options. their wife or husband hired as a consultant (on Paper) from the lobbyist of the war machine for a yes, to the contracts awarded. Our elected remains silent!
Our schools are forced to lay off teachers while the school boards members give themselves outrageous salaries and benefits, purchased highly overpriced school books and material from a company owned by member of their board. The college's are passing out catalogs and encouraged the students to purchase that has only goods made in Malaysia. Why? The college get's a kickback. Let's not forget the salaries of the college boards, What have they done or doing to justify the Million dollar salary's and benefits they receive? Why has the tuition for students reached an all time high while teachers salaries being slashed? Why are the Banks charging such high interest on student loans? Our elected remains silent!
Why are there protesters on the streets of America? The answer is simple; We Americans citizens have been sold out by the people we elected from the mayor to senate and the house. They do not hear us when we speak, the do not answer us when we phone, fax, email. They has passed rules that have placed them above the law of the land. Laws that you and I must live with. They have voted themselves salaries, Health, retirement, travel, office, housing,benefits,Paid for by American taxpayers, while taking orders and receiving gratuities from corporations They allow the campaign ads to do their talking for them. Ads that infuriate the American citizens that have done their research and know they no longer can be called representives of the people that elected them. They should now be called by their proper title,Salaried Representives of the international corporate board. Time to clean out the ALL those offices inhabited by the corporations robots that are destroying your freedom, your jobs, your home, your children, .
Let's not forget MAY 1970, Nixon ordered the invasions of Cambodia after promising to end the Viet Nam war. Ohio, Kent State U. Student protesters, 6 dead. many wounded.
Let's not allow history to repeat itself!
What kind of idiots can't make money when the Fed gives it to them cash for nothing to loan to us at outrageous rates of interest. I have read the highest rate of interest on credit cards is 72%. Some of the cards I had (but destroyed) were at 30%.
If the Wall Street boys are suffering, it couldn't happen to a nicer and more incompetent group of people. I have more respect for burglers because they at least are honest about their profession. These guys have been stealing for years but "legally".
Boo f-'in hoo! Now they might have to sweat and make money by actually "working" if you can call it that at all...
On a related note, I've heard of this guy who went to his nearest financial center to decry the actions of the "money changers"
His name was Jesus...
I'm not religious by any means, just amused that 2000 years ago Christ knew where the real evil in the world lay...
These banks are not hurting for money. They are still showing profits. It's American big business and government and coporate greed it always was. These banks are making money just not the type of easy money they were making before. They casued this whole market to cash, with there spend, spend , spend, attitude. Sooner or later you have to pay for the things you buy.Now there is no easy money for them becasue people are actually paying there bills instead of borrowing. Oh to bad you poor banks, maybe you should get a second job like the rest of us working folks, to pay your bills.
Americans with common sense and the least bit of intelligence have finally discovered that Wall Street is now the playground of the wealthy and corporate interests and offers little to nothing for the average investor. Wall Street and the banking industry have lost the trust of the citizens of this country.
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Perma-scowl master Jessica Alba could learn a thing or two from baby Honor...
WTF is up with the kid's head??? It's massive
Alba smiles all the time, sorry it's not for you jerks. I can't imagine why, given how you make a practice of belittling women. Funny that the last time you had pics of Honor WARREN on this site, you had to cherry pick from a ton to find one neither she nor her mother were smiling so you could run another untrue story.
that's a huge noggin. That's a virtual planetoid. it has it's own weather system.
Jessica Alba,
Her uncle taught at my highschool and she used to come in all the time. This was when she filmed Never Been Kissed. My best friend and I kicked her out of a party she was trying to get into and She shopped at the mall I used to work at all the time ... Do not like her, she is so stuck up. She is hispanic she is latina, SHE IS MEXICAN. Get over yourself. Stop being a snob. Anyone can make movies... Where is your Academy awards ... exactly..
Wow she's a beautiful little girl!
That is one huge forehead, am sure she will grow into it.
Your just mad because she ignored your dumb a$$ question. Stop being a jerk and people might talk with you.
I think she's a really cute baby, but I still can't believe they gave her such a stupid name!! Honor, Sweet Jebus.
She is not pretty,not a good actress and she is not nice ,she looks so miserable ,so unhappy it si not helping at all .Not wonder .Maybe is because not one is given her more jobs?Who she thikns she is Miss Congeniality?I would not spend my camera trying to show her we are not intersted on seeing her ,and her attitude ,she thinks she is a diva ha ha ha.I remember when she started in movies like Jennifer Lopez , it was black entertainment ,not famous and someway she got a opportunity and voila she is a wanbee diva.
Honor is nicknames "HOMOR" for HOMILY on all of the celeb sites she is named HOMOR because she is so fug not only does her head look abnormal she also is obese she has a butt the size of an adult so much so that it has been reported that alba has to buy depends adult size diapers to fit her obese piglet!
Does not matter that homor is a young toddler she fact is shfter e is not cute any way shape or form!
in fact when she smiles ( which is so rare) it looks like a butt crack on a butt instead of a smile on a face!
I wish the paps would spend their time on kids that are cute and worth the time and film this one is a complete waste
HOMOR is an obnoxious whiny fat as$ and her mother has no morals or values her last stunt is the one where she defaced property and is in big trouble for doing so but she did try to blame it on the friends she was with of course but she needs to take responsibiliity for her wrong doing and stop blaming others which makes her look like the fool she is!
albas kid is the ugliest kid ever she just won some teen age award WTF is up with a toddler winning a teen award? the only award she could ever win in her life is the ugly award of a lifetime...if you cant handle the go away! we dont want to hear you nonsense about people being jealous there is not a being alive that would be jealous of alba her himshe EVER the kid is definately half pig the other half mongaloid just ugly as they come..good thing the parents seem to love her because anyone who doesnt would want to put a bag over her head and leave it for life she is so ugly that is makes people literally nauseated
jessica alba is not that ugly but her kid is a shame that is all I can say it shocks me that her kid is as ugly as it is she does not even look like a girl she looks like a boy an ugly boy at that poor thing is going to have to have her parents get her jobs because with her looks and lacking personality she will amount to NOTHING without help
I used to think because homor never smiles ( like her mom ) that it was part of the reason she was not cute,,now that there is actully a picture of her smiling or maybe she is just pooping her pants since I doubt she would ever be happy enough to really smile,,,none the less smiling does just not help in fact it makes things worse she is even uglier when she smiles this kid is doomed she looks just like the dad need anyone say more UGLIEST KID EVER MADE that is honor alba!
WTF is the reason this fat biotch is still being carried around everywhere she goes? she needs to walk her fat butt it makes me sick that jessica carries her kid when she is so fat she really needs to burn off the obeseness i would hide my face if i were jessica showing anyone that kid has got to be terribly embarassing and humiliating
make the little biotch walk she is much too old to be carried like a little infant
even autistic kids can walk ok so everyone knows she is autistic by now, still make her walk
no one likes whiny pitiful kids that have to be sheltered by the parents honor is a loser already just like her mom
Guess which one had a Happy Meal?


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The Neighborhood Network/Pasadena Industrial Community Network offices have moved from the Municipal Services building effective immediately.They are now in Pasadena City Hall and are located at the first door to the right as you enter the lobby of City Hall. Parking is conveniently provided at the front of City Hall, just off Southmore.
The City of Pasadena, Texas Neighborhood Network and Industrial Network Division mission is to improve the health, safety and welfare of Pasadena neighborhoods by offering economic incentives, organizational assistance and resources.
The division began in February of 1998 with only 12 identifiable neighborhood/homeowner associations organized within the city of Pasadena. Since 1998, the Network Division has worked to assist and organize over 117 neighborhood and/or homeowner associations.
Linked here is a list of the neighborhood/homeowner associations within the Pasadena city limits that we have helped to improve their respective neighborhood's quality of life. If a neighborhood has homeowners who pay property taxes to the City of Pasadena, our office stands ready to assist them.
Families with children who live within Pasadena's city limits may attend one of the following school districts:
- Pasadena Independent School District;
- Clear Creek Independent School District, and;
- Deer Park Independent School District.
We also have residents who live within the city of Pasadena and pay Pasadena property taxes yet have a Houston or Seabrook, Texas, address. Our neighborhoods' boundaries go from Highway 225 to the Galveston Bay making each neighborhood unique!
The Neighborhood Network Division office is located in the City of Pasadena Municipal Services Building (old Police Dept. building), 1114 Davis, second floor. Please contact Neighborhood Network Division Manager - Karen Hollon to schedule an appointment at 713.475.7221 or email her at email@example.com.
The Network Division offers the following resources to help our residents improve their individual neighborhood and our community as a whole:
Matching Grant Program
Does your neighborhood organization want to improve its residents quality of life? All projects that improve the health, safety and welfare of the neighborhood may be available for Matching Grant program assistance from the City of Pasadena. Here are some project ideas that may benefit your community, but you are not limited to just these:
- Landscape your neighborhood;
- Hold a festival;
- Install playground equipment;
- Publish a newsletter.
To get an idea of the steps involved in the Matching Grant process, view or download this flow chart as an introduction.
Because an informed citizen is a pro-active neighborhood member, the Neighborhood Network offers workshops for residents and neighborhood network participants. These are a great way to meet your neighbors and learn what other groups are doing to improve their neighborhoods.
Individual Neighborhood Association Web sites
If your neighborhood association has developed its own web site where information about your group is posted and shared, please contact us so that we may list you here for others to access.
Village Grove East
Village Grove Community Association
Burkeshire Homeowner's Association
Fairmont Estates Neighborhood Association
Contact Us
For more information on the Neighborhood Network Division or how to create a neighborhood organization, call Karen Hollon , Division Manager, at 713-475-7221 or email her at email@example.com. If you plan on coming by, our offices are at the Pasadena Municipal Services Building (old Police Dept. building), 1114 Davis, second floor.


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About.com is by far the largest network of hand-crafted expert content on the internet, providing 87 million monthly unique users outstanding intent-driven actionable information. A top-10 US Website as measured by Comscore, we feature 11 robust content channels, including Health, Money, Food, Home and Style, covering nearly 1,000 topics and over 4 million articles. We are the premiere expert-driven resource on the internet.
We are looking for bright, engaged, creative and fun people who are looking to be part of an inspiring team that embraces change and ideas, and puts huge value on a great work environment. We value transparency, accountability, data, design and fresh thinking. Be part of a small team environment, where suggestions and ideas at every level directly impact the business and add value to our product.
About.com isn't just your next job; it's the place where you go to start the next chapter in your career. So, come see how you can Do More with your career at About.com!
Hear What the Team is Saying
Working at @Aboutdotcom, you get to contribute to one of the largest sites on the Internet. As part of the tech team, that means being able to do work that's seen by millions of people every day.
Working with people who love what they do is what I look forward to everyday. It's a wonderful thing.
Recently there's been a renewed sense of energy and excitement towards revamping our product. It's inspiring to be a part of that.
Everyone here shares a common goal and is enthusiastic about getting there together. There's a real sense of collaboration and respect between teams and departments, and that is not something you'll find at any old job.
There's immense potential in the health space and I'm looking forward to working with smart people as we face challenges and triumphs.
I like working at @Aboutdotcom because we are using data & new online strategies to create high quality content for everyone.
I'm extremely happy with my decision to join @Aboutdotcom's team! The amount of support I received from all team members to help not only get me started but be successful in this role, is what I appreciate most.
About.com is a creative environment where all team members are encouraged to bring their ideas to the table. It's refreshing to see my ideas implemented within the company.
The coolest thing about PR is that we get to work with just about every department, which makes for a highly collaborative & creative environment. Our job is to tell the story and if we do it well, then we have the chance to make an impactful impression on how others see us.
As @Aboutdotcom continues to invest in the future and grow the business, I see the growth opportunities for my team and me are increasing as well!


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DVR (Time-shifted) Adults 18-49 Ratings – Program ratings for national sources are produced in three streams of data Live, Live+Same Day (Live+SD) and Live+7 Day. Time shifted figures account for incremental viewing that takes place with DVRs.
Live+Same Day(Live+SD) ratings include viewing during the same broadcast day as the original telecast, with a cut-off of 3:00AM local time when meters transmit daily viewing to Nielsen for processing.
Live+7 Day ratings include incremental viewing that takes place during the 7 days following a telecast.
DVR Ratings Increase Past Airdate – How many people watched the show on their DVRs within 7 days following the airdate
Sarah Michelle Gellar's star vehicle, "Ringer," on the CW, had the highest percentage increase in the 18-to-49 category of all the network shows, adding 67 percent to its original audience in that demographic group.
Ringer to be canceled? THINK AGAIN.