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They say there’s no “magic money tree”…well there is! But…

Bryan Gocke

Image source: /agamerica.com

In Britain, if it wasn’t for BREXIT we would be discussing (among other things) Labour’s proposed economic policies, including an expansion of public sector spending. There would be a storm of media led disparagement about plans to stimulate the economy through borrowing and increased taxation and concerns raised about not paying down the national debt. As Theresa May said whilst campaigning for the last general election “There is no magic money tree.”

I find it particularly disheartening that many well informed, left leaning people buy this criticism, worrying whether the country can afford improved public services and whether this will make Labour unelectable. The stock response of the Left to this would normally go along the lines of:

  • The Tories are in disarray and deeply split over BREXIT and thus just might be even more unelectable than a slightly radical Labour Party.
  • Britain is a rich country; surely it can afford better public services than it currently has?
  • Labour’s proposals are, in truth, underwhelming! They represent such a modest step in a process required to reverse a decade of austerity and cuts.
  • Revenue from taxation in Britain has become wholly inadequate to the task of ensuring a fair, equitable society. Increased progressive taxation would begin to re-establish a common, shared responsibility for all citizens and fund the necessary increase in public spending.
  • The current focus on ensuring a balanced national budget and paying down the National Debt is misplaced and thwarts economic regeneration and development. Britain, with its well established capital markets, has had no trouble borrowing funds to finance the public sector deficit since the financial crisis of 2008 [1] and thus could fund public sector programmes in this way in the future. At current, low, levels of interest, it would be foolish not to do so! Moreover, provided that interest and repayments are in Sterling (hence avoiding the risk of exchange rate fluctuations), borrowing essentially represents a transfer of funds from savers to the Government – the country as a whole is neither richer nor poorer. A large proportion of the national debt is money that we owe to ourselves. However, the payment of interest does represent a transfer of funds from taxpayers to savers; individuals and commercial organisations profit from the need for the Government to borrow.
  • An economic stimulus focussed on improving public services could be used to re-establish secure, full time jobs and help to reverse the current trend towards precarious short term zero hours contracts[2]. The wages would almost entirely be spent by the workers (as opposed to being hoarded / used for speculation by richer people) and thus would serve to stimulate the economy further through the multiplier effect. Spending wages will stimulate other parts of the economy; you get a bigger bang for your buck as well as progress towards a better society!

It was with considerable interest therefore that I read a recent article by Jim Kavanagh on Modern Monetary Theory [3], which suggested that the Left needs to update and refine the way it promotes the credibility of a an economic stimulus approach that focusses on investing in public services.

Jim provides an excellent summary of Modern Monetary Theory (MMT) and I will attempt a rather briefer one here in order to provide the context for a discussion about the chances for implementation in Britain and its possible consequences.

Current state financial structures in capitalist countries include a central bank, which sits uneasily between the government and commercial banks. It is commercial banks which digitally create the vast majority of the money supply, loosely regulated by central banks, through loans to customers and of course to the government. As pointed out above, this is an income generating process for those with capital and is portrayed by governments, banks and much of the mainstream media as a natural state of affairs. Whilst this is indeed central to the development of capitalism as we know it, it doesn’t need to be this way – governments, if they have a sovereign currency that is not linked to precious metals etc, could create money themselves in order to pay for increased public expenditure without incurring the interest costs that borrowing would incur.

If governments can create money then it follows that what they spend doesn’t have to be constrained by revenue from taxation. MMT posits that taxing and spending are separate processes that shouldn’t be linked in this deterministic way and argues that central banks understand this only too well. Whilst democratic institutions wrangle over how much to raise or lower taxes in order to ensure a balanced budget, central banks adjust interest rates and bank regulation (in order to control the money supply) on their judgement as to how close to capacity a country’s economy is. The same type of judgement could be used to ensure that any economic stimulus based on government created money is tailored to producing a maximal utilisation of labour, capital and raw materials to meet democratically sanctioned policy objectives.

Now I can hear the clamour – ‘What no need for taxes? – this really is a magical money tree!’ and, more ominously – ‘What about the threat of inflation as the economy moves beyond maximum capacity?’

This is the really neat thing about MMT – progressive taxation is used not to fund public expenditure but to constrain demand and thus manage inflationary pressures. This has the added bonus for the Left as it limits the income of wealthy people – it actively reduces inequality.

It challenges that received wisdom on the Left that in order to run a decent state apparatus with good inclusive services you have to either i) borrow and/or ii) increase taxes. Over the last 50 years Neo Liberalism has learnt how to deal with this approach. It’s no longer working for the Left, for social democratic parties, or for the vast majority of people.

MMT correctly identifies the smoke and mirrors of modern money, not fixed to a scarce precious metal but the digital creation of private banks. Sometimes they lend too much (and to the wrong people) then it goes badly for a bit and then, when they’ve taken advantage of the public sector lifeboat, they don’t lend enough – or at least not to the right people or businesses. If the state took direct control of the money supply through its central bank[4], it could, guided by the democratic process, develop better services, have full (and securer) employment as a legitimate goal and move gradually to a more equal society.

I am attracted to the concept – it seems a much better way of doing things: create money to fully utilise our resources (labour + capital + natural resources) to produce a more sustainable, supportive and enabling society and then use taxation of the rich! to choke back demand, manage inflation and maintain a much, much more equitable distribution of wealth and income. It’s a better model of capitalism than we have at the moment, why wouldn’t you like it?

But can it work?[5]

On the face of it the current world economic order is less than conducive to a MMT approach:

  • Globalisation has made it increasingly difficult for elected governments to have meaningful effect on their own economies.
  • Western capitalism is struggling to find, develop and exploit new markets, and is in the process of commoditising many personal, individual behaviours and actions. It is prepared to fund and on occasion participate in wars to defend or create markets. Automation and artificial intelligence are driving profit margins down as there are fewer workers required in production and thus less to exploit. Capitalists feel they need even greater efficiencies (aka increased exploitation) – not a state wanting to tax them much, much more and look after people better. Where’s all that going to lead eh?
  • Finance capital has grown significantly as a proportion of overall capital – always a sign that the current capitalist iteration is running out of steam – and there is no obvious successor at the moment. The current new technology is information technology – electronic communication and co-ordination – but it doesn’t make that much money and it doesn’t employ that many people. You don’t get the stimulus of huge engineering plants, factories, with their paid employees etc – the sort of advances that have bailed capitalism in the past (Paul Mason)[6]. It‘s easier today to make a profit by lending to someone who can’t afford to pay it back than investing in a factory to employ them to make something useful (and contribute, through their wages to the wider economy).

OK, given this not very encouraging context, how would a left of centre Labour Party in Britain fare trying to implement a MMT approach? There are likely to be a number of specific economic consequences:

  • Inflation is difficult to control in an overheating economy – currently a distant memory in Britain. The risk of hyperinflation is real and, as central banks know, it is difficult to judge when an economy is reaching full capacity and to determine the scale of measures required to manage this.
  • Capital will consider moving abroad to less regulated, less taxed countries. Their taxes will be lost (although that might not add up to much of a loss given current levels of tax avoidance) and some jobs will go too, although many will have been created in the public sector.
  • ‘Confidence may be lost’ in the state of the economy (affecting inward and domestic investment).
  • The value of Sterling would probably begin to fall in the currency markets and is likely to result in a downward trend as it is increasingly (and more desperately) traded for other currencies in an attempt to ‘get out’ before the spiral really begins and significant losses are accrued. Speculators will exacerbate this process, selling sterling with the intention of buying it back later, at a much lower value and thus realising a profit from the country’s misfortune.
  • The cost of imports will rise and so will the cost of living (which will impact disproportionately on poorer people).

The development of this economic scenario will have political consequences:

  • The centre (well maybe a little bit radical) left party presiding over this will be facing a run on Sterling. They are not going to have time to implement their positive programme of job creation and services and are going to have to buy sterling back at a lower value to try and stabilise the market.
  • I know that investors who sell Sterling are only doing so out of rational (self) interest but it is difficult not to be irritated with them! Whilst the government will be ‘personning the pumps’, trying the ‘steady as she goes’ approach, the lot who have withdrawn their engagement with the economy will be telling everyone who will listen that the Government was to blame – ‘Incompetent management of the economy’, ‘inevitable with a high spending left of centre administration,’ ‘Undermining us all, the children, the old ……. There is no magic money tree!’
  • A Sterling crisis may provoke a general election where the centre right (and a bit) are returned to power … to unpick the reforms based on MMT. Austerity will be the inevitable prescription. Public confidence in a left of centre approach will be eroded and may result in a lengthy period of government by the centre right.
  • There may not be a general election, the government may feel it has no choice to push the MMT reforms further, faster than planned – to buy their way out on the basis of their democratic mandate. This, I would envisage, will require a move further to the left and will be highly dependent on maintaining popular support in the country.
  • Should a centre left government be successful in establishing a MMT approach to the management of the economy and inequality begin to be seriously tackled, those who own most of the stuff will have to decide whether it is better to go along with it in order to maintain relative privilege or to challenge it head on through right wing populism (and worse).
  • In a global economy Britain will find itself isolated, pressurised and bullied by powerful capitalist countries and it will need to form alliances and trading agreements with other, non-aligned ones, although it is difficult to see who these would be.

So, implementation of a MMT approach in current circumstances is likely to be very hard going indeed. I asked above ‘why wouldn’t you like it?’ and the obvious response to this is that a small group of people (the 1% who own such a disproportionately large share of the world’s wealth and income [7) will not like it at all and though small in number they wield disproportionate power through governments, institutions, business and of course the media. They are unlikely to acquiesce without a fight to the loss of privilege and wealth that would result, unless they feel that it is their only option.

It is tempting to sigh and say ‘Of course MMT won’t work – it’s not in the interests of the 1% and they will act accordingly’ …. but hey! it is self-evident that defeatism will not aid the development of more progressive political and economic policies.

Jim rightly highlights the need for political will and for the overwhelming support of the population for the implementation of MMT and, as with any attempt to build a popular base for more progressive policies, this is a particular challenge. Having listened on a number of occasions to shadow chancellor John McDonald being interviewed by John Humphreys on BBC Radio 4’s Today programme about current Labour proposals, I can already hear the disparaging incredulity ‘What … you are proposing to spend vast amounts of money without even attempting to raise the revenue to cover the ensuing deficit !!!!!’ Mainstream media will quickly be on the hunt with the usual tales of Labour incompetence, the danger to the economy .. if not the fabric of society itself!

The challenges are significant – but they always have been for progressive politics and at times, in certain circumstances, progress has been made, inequality reduced and more of the 99% have been empowered. MMT provides a fresh way of looking at how capitalist economics works, it asks different questions and exposes different contradictions and unfairnesses. Can it provide opportunities for the Left now?

  • There is an increasing awareness in mainstream economics (and even mainstream media) that the current carry-on is not sustainable – that rising inequality is a threat to the current order and that ‘trickle down’ theories of income and wealth are becoming discredited. These insights can inform and underpin a more confident Left.
  • The result of the last general election in Britain suggests that mainstream media may have a declining influence on public opinion as many, particularly younger people, access social media and alternative sites for news and opinion. Sites like The Canary offer an alternative, more progressive perspective.
  • There are signs that scraps may be offered to try and head off at the pass any revolt being considered by those who have lost most through globalisation and those who will lose through increasing automation and the introduction of artificial intelligence. A universal wage would not only offer a (low) safety net for the population at large but also maintain some semblance of demand for goods and services outside of the elite and their managers. As unemployment rises this may detach large sections of the middle class from the 1% and support the Left in arguing and agitating for the highest level of universal wage possible.
  • Despite current received political and economic wisdom there are examples where money has indeed been created to meet a perceived need eg the QE initiatives post the 2008 crisis (currently amounting to around £435 bn in Britain). The Left can argue that such an approach could and should be used for the benefit of the majority rather than acting as an asset protection scheme for the upper and, it has to be said, middle classes (the top 10%).
  • As one would expect, it seems that there are tensions and conflicts within an elite that has become more individualised and less able to act in concert as a class (Aeron Davis)[8]. Although this has potential for exploitation by the Left it also highlights that the elite may be unable to collectively sanction the sort of social democratic redistribution of income and wealth that it was able to do in the past in the West (e.g. the post-world war 2 ‘consensus’).

It seems that MMT has a logic and a coherent rationale that could be made to work, but once you consider the issue of power : who has it, how it is maintained, and how it is used, the difficulties of implementation can seem insurmountable. Nevertheless, the current capitalist iteration in the west is struggling to maintain profit levels for the 1% and to keep the other 99% sufficiently on board to maintain social stability. This provides an opportunity for the Left to promote an alternative way forward, but (as ever) to be successful it has, at a minimum, to gain the support of a significant majority of the 99% and has to engage with the 1%; either to persuade it that ground has to be given, or to force it to accept change (and all that goes with that).

So there is a Magic Money Tree and (helpfully) it has the same initials as the economic theory that underpins it; Modern Monetary Theory! It is an approach that could help to deliver a more equitable, supportive and inclusive capitalist society…but…like all progressive politics, its implementation would be dependent on tackling the power and privilege of the minority who benefit so much from the current state of affairs.

Perhaps the more modest potential of MMT is to reveal a key set of processes that are central to the current economic system and to help promote an alternative; as Jim says ‘It raises the curtain’. Can the Left use this to debunk a range of self-serving myths pedalled by the elite, further discredit what is becoming an increasingly dysfunctional capitalism and begin to suggest a more equitable and workable alternative?

Bryan Gocke is a retired public sector worker in England.


  • [1] UK Government debt rose from around 49% of GDP in 2007 to about 85% currently. There was never a concern in the capital or foreign exchange markets about raising these large sums of money.
  • [2] Economic stimuli work best where there is under capacity in an economy. Mainstream economic advice would hold that such a stimulus is likely to result currently in inflation due to current low levels of unemployment and poor productivity in Britain.
  • [3] Jim Kavanagh – ‘Behind the Money Curtain: A Left Take on Taxes, Spending, and Modern Monetary Theory’ Counterpunch (January 2018)
  • [4] Public ownership of the larger Banks could be a component of this approach; which would obviate the need for the Government to direct (and micro manage) all investment decisions towards its policy goals. Public ownership of some (failing) Banks did take place following the 2008 crisis, so it is a credible approach, but no attempt was made to give them different lending objectives that might, for example, have focused on improving productivity.
  • [5] I am indebted to my friend Peter Lawne for providing me with much contextual information and analysis and helping me to think through the implications of MMT in a British context. Thank you Peter!
  • [6] Paul Mason – ‘Post Capitalism’ (2015)
  • [7] Thomas Piketty – ‘Capital in the Twenty First Century’ (2014). Evidence is provided that in Britain: the top 1% of people receive around 15% of all income and own around 30% of all wealth and that the top 10% receive around 35% of all income and own around 70% of all wealth.
  • [8] Aeron Davis – ‘Is the establishment finally finished?’ – The Guardian (27.02.18.)


  1. From Ellis Winningham

    Here’s what – If everyone in the UK, the US, and Australia (to name just a few places), could stop viewing the world as a place where workers, business and the government all compete for scarce, precious commodities called dollars and pounds, that would be great.

    The dollar and the pound are not commodities, they are not something found underground, they are not physical objects, nor are they electronic.

    The dollar and the pound are ideas; they are IOUs represented by a name and a number, and we keep track of them by putting them on paper, or typing them on spreadsheets.


    The Management

  2. Toby says

    @MMT advocates:

    How can an infinity of money be a useful addition to economics? In what real world situation would it be possible? How is it relevant even as some asserted potential?

    As an impossible number, I can see no way this concept is practically useful. For me it is a poetic/metaphorical device I see as somewhat helpful to demote or downplay money from its current mythos as Unquestionable Power. We need, in my view, to recognize the malleability of money systems as man-made tools, and pointing out money’s virtual, ammendable nature can help the curious to begin to rethink money. Beyond that, infinity in economics quickly becomes problematic, as in other disciplines.

    An infinite amount of money can mean, for instance, that all market participants have an infinite amount of money. An obvious absurdity. And what would a sovereign government actually do with an inifinity of money? Make all citizens infinitly rich, or simply rich? Of course not. Make all state-owned infrastructure everywhere excellent? Sounds great, but that takes a finite amount of money that must be ‘affordable’ on all sorts of measures, not least environmental costs. For me, referencing infinity to point out that we can indeed, as a sovereign poeple, choose to afford better infrastructure, is a poor line of approach. Far better to reference real human skills, needs and environmental carrying capacity, then create the consequent finite amount of money and/or money system in accordance with those constraints.

    MMT uses the scoreboard metaphor. and points out there is never a shortage of points. Fair enough. Similarly, argues MMT, sovereign governments can always, technically speaking, print/create/add/spend money, just as a scoreboard can be incremented at any moment. But a scoreboard is incremented when and only when someone or some team scores a goal/whatever. And infinity will never happen as a score. Nor will a score of 100:874 be recorded for a goalless draw. The score accurately reflects reality or is useless. The notional possibility of the scoreboard always having an extra number in all circumstances is true, but of little interest. Furthermore, incrementing a scoreboard does not incur debt at compound interest. Some amount more than the actual score is not owed to anyone. And while it’s true that the interest owed in the case of money-debt is also, from a purely accountancy perspective, ‘just numbers’, the game of economics it is linked to is not. Economic activity always exacts a cost on the environment, just as footballers’ boots exert wear and tear on the ball and pitch, just as the scoreboard is subject to weathering, uses electricity and raw materials, etc. There is no escpaping this. This is no red herring.

    Netting to zero is also true in accountancy terms, but, as BigB has rightly pointed out, the real world is raped nonetheless. Just because the accountancy is clean and always balances out perfectly does not mean that the rest of reality is undamaged/unaffected. Accounting the financial costs of a war is the same: double-entry bookkeeping demands it. Who cares? Energy nets to zero too in that it stays constant, argues physics, but look at the complexity of reality that truth masks.

    MMT acknowledges constraints, as you point out. So what, exactly, is a constrained infinity? How central a point is it? jag and John G and others appear to dismiss the real world while acknowledging it. mog, BigG and I have actually taken the time to dive deeply into MMT material. Some of it appeals to us, much does not. My own reservations are closely echoed here by BigB and mog. Nothing you guys have added to the debate does anything to mitigate my concerns, nor did any responses I got during 2010 and 2011 from Bill Mitchel and others while I was studying MMT and other alternatives.

    Power is real. Ambition is real. Sociopathy is real. Greed is real. Injustice is real. Neither infinite numbers nor double-entry bookkeeping seems to want to have anything to do with them. Money as “neutral veil”, “value-neutral economics” and all that bunkum. None of it stands up to scrutiny.

    • jag37777 says

      Neither of you have delved into MMT. You’ve both completely missed the basics.

    • “How can an infinity of money be a useful addition to economics? In what real world situation would it be possible? How is it relevant even as some asserted potential?”

      Put simply, an infinity of money is a useful addition to economics because it demonstrates that the government is never constrained by financing. If you listen closely (or even not closely), you will constantly hear politicians repeatedly tell you that the government cannot “afford” to do X and repeatedly explain how it is not possible to “pay” for Y, or repeatedly explain that we cannot do something because it will increase the government’s “debt” too much and burden future generations (think of the children!). Or repeatedly explain that the government needs to “tighten its belt” and “save” money for the future. These are ridiculous, nonsensical lies. When we understand the real capacity of the currency-issuing government, we can move beyond these trite lies into real discussions about how to best use available resources. There is no further utility to the concept of infinity beyond this–rebutting these kind of ignorant arguments–and most people who understand MMT otherwise don’t dwell at all on the concept of infinity.

      Instead, we shift to the practical. It will be a good idea for you to think in terms of stocks and flows. A stock is a pile of something. A flow is the movement of something. When we say the government has an infinite supply of its currency, we are talking about its stock. That stock, sitting there doing nothing, has no economic effects. It’s just mathematically true that the government has an infinite supply of its fiat currency at its disposal. It is when that currency is spent into the private sector as a flow that we see economic effects, and of course it would never spend infinity units into the private sector. When the currency flows into the private sector exceed the flows the government revokes back out of the private sector, then the private sector builds a stock of the government’s currency. These are the private sector’s savings. Thus, fiscal policy (spending and taxing policy) quite literally determines what stock of currency the private sector will have as its savings. When the government runs a surplus, savings fall. When it runs a deficit, savings grow. The private sector, in turn, makes spending decisions based on its access to currency. When it has access to more currency, it will tend to spend more. When its access is cut off, it will tend to spend less. The alternative to spending less is borrowing from private banks. We saw what happened when Western governments obsessed with fiscal austerity (Blill Clinton, Tony Blair) began draining private sector savings. People turned to borrowing to sustain spending and, in conjunction with deregulation of the finance sector, it ultimately produced the mother of all financial crises. (One could increase regulation to help stop financial crises, but then one would just get a recession sooner as spending slowed in response to the savings drain.)

      What MMT has demonstrated to me is that the finance sector has for decades now dictated government fiscal policy to create currency shortages in the private sector. Why? Because the finance sector’s product is credit. And currency shortages “incentivize” borrowing. In other words, they are using the government to grow the market for private debt. Look at any dataset for any English speaking Western nation over the last 80 years or so, and you will see the influence of these policies on private debt loads as a percent of the economy. And how do they get away with it? Well, for one, effective propaganda that conditions people to think the government is finance-constrained when it, in fact, is not.

      And the finance sector is just the head of the snake. Currency shortages also make working people more dependent upon their jobs and less economically stable, which drives bargaining power down. Thus, capital’s owners and managers across the board benefit from these fiscal policies and have even managed to shift national income away from labor and towards capital over the last thirty years, a feat that most economists had previously thought impossible.

      In short, MMT exposes neoliberalism, and that is why it is valuable.

      • Toby says

        Thank you for your considered and helpful response, pigswiggle.

        The circular in and out of currency, both via gov spending / taxes, and debt repayment / credit creation, is nothing new of course. It has been with us since before MMT as an idea and as practice, even in Roman and medieval currencies. And even gold has this ‘infinite’ aspect in its mythos: always shiny and apparently unchanging, retrieved by the king/sovereign as taxes/conquest and then recirculated back / spent into the economy.

        However, in and of itself, this circularity does not fully cover what we mean by “afford”, nor what quantities of currency ought to be circulating through an economy relative to the economic activity in that economy, nor does it address what we mean by economic activity. One commenter on this thread pointed out that much of MMT’s argument is not new; this would be one of those aspects.

        Which returns us to the question of what is doing the affording. Obviously it’s not the money in and of itself. As I see it, “afford” is the emergent consequence of a number of factors, one of which is money, one is environmental carrying capacity, one is human know-how, one is political/social will, one is desire, etc. Again, that money can be handed back and forth to effect economic exchange ‘indefinitely’ is merely one part of the equation. Indeed, we don’t ‘need’ money at all. Humans engaged in all sorts of ‘economic’ activity prior to ‘money’, though this does depend on how we define economic activity. That’s hard enough. Defining money is even harder. And regardless of one’s passionate convictions as an adherent of this or that definition, it remains controversial.

        So, as I stated in my comment above, we are not talking about infinity, we are talking about flexibility. I also asserted that power comes into this in a big way, as does greed, as does secrecy, obfuscation, jargon, etc. These elements are more important than money’s flexibility as a man-made tool. MMT accurately defines the mechanics of the ‘car’ (very important), but not really how it is driven (a point rightly made in various ways by BigB). As you said, politicians are always going on about “afford” in a very negative sense. MMT arguments appear make little impact on them. They understand money in a primitive way, and it infuriates me to see this aspect of economics remain as mired as it is. I haven’t watched TV for about a decade for this and similar reasons.

        I want, as you and MMT do, money’s hold on our imagination broken and recast. That said, I do not believe words like “infinite” are helpful to that end, as I pointed out previously. And, to repeat, I don’t think MMT goes far enough while promising too much of the wrong stuff (e.g., a jobs guarantee, growth). In my view, we need a thorough and wide ranging public discussion on: economic activity as husbandry of the environment, of value as always subjective and not a thing to be hoarded, of money as mere enabler of economic activity and not something to hoard because it ‘stores’ value, of wealth as a network effect arising from spiritual qualities such as total health, trust, transparency, maturity etc., and many other things besides. MMT does too little of this imo. If I’m wrong, I apologise, but the discussion here is at it was when I last looked. Hence my efforts to place environmental carrying capacity right at the heart of all economic discussion.

        • I agree with you that MMT does not address the things you want to address, but it’s not intended to. Those are political questions, not economic ones. What MMT does is allow us to bring those questions to the fore and to talk about them, by showing that resources and priorities are the real questions we should be discussing.

          It’s worth pointing out that “jobs” and “growth” are not necessarily destructive. Jobs can be economically destructive or constructive. Growth is just a measure of exchanges, which can again be either destructive or constructive. With a job guarantee, it is the government deciding what work gets accomplished, not corporations trying to maximize profits. The jobs can be anything at all, and as designed by MMTers are determined locally.

          • jag37777 says

            You’re mote patient than I can be these days. All the standard buts, ifs and what abouts from the fake progressives wear me down.

          • Toby says

            Elsewhere in this thread, I mentioned Geoffrey Ingham, an economist/sociologist I admire as he seeks to redress the split between politics/sociology and economics that has bedevilled all three domains since the split was established. In that vein, an interesting article thoroughly debunking money as “neutral veil” (by either Otto Steiger or Gunnar Heinsohn, or both, I forget) – a concept that is a direct manifestation of this split – makes for interesting reading and was written from roughly the same critical angle as Ingham’s The Nature of Money. In other words, there is plenty of excellent material out there on this important, though sadly controversial issue. So while I understand the cool attraction of keeping the subject matter of economics as ‘impartial’ as possible, I believe this to be a fool’s errand, and most likely a cynical one. Indeed, MMT promotes growth and a jobs guarantee, both of which are political creatures.

            As for construction/destruction, we cannot have one without the other. Doing work requires energy and thus resources one way or the other. The point is to be intelligently cognisant of environmental carrying capacity as a constraint when establishing how much and what sort of construction/destruction we engage in, a process I would like to establish as scientifically and democratically as possible. At first glance, that may appear contradictory, but without going into huge amounts of explicatory detail, I’ll just say this: it needn’t be. One thing is clear though: perpetual growth of economic activity is impossible.

  3. “Money has to be pegged to a valorisable goal”

    No it doesn’t.

    That’s just your inability to accept the reality that money is a virtual concept scoring credits and debts. It is ceated out of nothing and returns to nothing.

    0 is your friend when thinking about money.

    Money is like the points on a scoreboard.

    • BigB says

      In its journey from 0 to 0, virtual money destroys Nature – human and environmental – for 0 marginal benefit …but the costs are real. That is what we have tried to point out. It is not an abstract journey: human economy and ecology are negatively and destructively paired. Look at the totality from a systems thinking POV. You are isolating economy in a virtual bubble, as an abstract nested sub-system that does not impact the whole. This is classic Cartesian misrecognition of holism: you cannot isolate a sub-system and say it is infinite and not interacting with the rest of the system. The meta-system – Nature – is biophysically constrained and its regenerative capacity severely compromised by our economic destruction …for 0 marginal benefit to us: but with real life destroying costs. The smart thinking would be to design a system that economically benefits us, whilst paying its dues (in a regenerative capacity) to Nature. Ecology, economy, and human evolution are metonyms for the same thing …that valorisable goal is us. Infinite money and unpegged negentropic economy are part of the very Cartesian-Darwinian-Newtonian misrecognition that caused the current perilous position …they will not get us out of it – only holistic systems thinking will. Think whole and welcome to the new emergent left.

  4. John G says


    ” We recognise the reality that money is infinite. You do not recognise the reality that resources and energy are finite. Work from there.”

    On the contrary. I recognise both. MMT is acutely aware of real constraints. You’d know that if you had the cortesy and the intellectual curiosity to research the subject you are so keen to criticise.

    Strawman arguments and assumptions are not conducive to reasoned debate.

    • Rhamphotyphlops says

      John G and jag37777, you might have more luck persuading people if you did not appear to be insufferable twats in your responses. Your responses may be correct within your narrow blinkered MMT view, but MMT alone will not fix all of the problems with the current economic system and people are quite rightly looking at a broader perspective in the comments.

    • I wrote those comments as someone who actually facilitated public lectures which sought to explain MMT to the public. I went to see Wray in person and have read enough Bill Mitchell blog pages to know that the same conventional endorsement of economic growth is present in the MMT movement, the Positive Money movement, as well as promised by other monetary solutions (public banking, helicopter money, debt jubilees etc.).

      My point is that these enticing promises do not, on the whole, address the fundamental issues we face : a growing population and dwindling resources amidst a pollution crisis.

      I am not against MMT, it’s just something of a false promise. A job guarantee funded by government borrowing could help some, if engaged wisely. But only so far. I mean what are people going to actually do ? Grow beans ?

      • BigB says

        On the current trajectory: after the crash of the Cartesian lifeworld of carbon capitalism. …that is exactly what will be left to do: grow beans …only some farmers will be more equal than other farmers …and those who were once the lords of carbon and money will still be the feudal overlords! 😉

      • jag37777 says

        Better to cull the human population in your opinion I suppose.
        Nothing you mention has anything to do with MMT.
        A job guarantee could give people jobs doing the things that aren’t being done now. There’s plenty of that around.

  5. BigB says

    Jag3777: I agree, in principle, but I still say that is a theoretical position, and not real world realistic or empirical. Since 2008, we have entered a (irreversible?) period of non-standard economics. The G7 CBs are not instruments of the government: they are instruments of the BIS and the asset owning international superclass. They are not a sovereign, but a supra-sovereign entity. As such, they have acted collectively to destroy economies: to preserve the wealth of the superclass. In as much as governments have gone along with this, they have colluded too: conspiring against the electorate. I contend that they CANNOT be said to be a sovereign entity: or the sovereign issuer of currency. It is doubtful they can be referred to as ‘sovereign’ at all. I’ve cited Nomi Prins – Collu$ion: How Central Bankers Rigged the World for the empirical position.

    So they [the G7 CBs] manufactured the size of the GDP of the United States [$21tn] out of nowhere, just the biggest banks; they used that to buy, in some countries for example throughout the European Union, corporate bonds; throughout Japan, stocks; throughout the U.S., government bonds and mortgage bonds; and so forth, all through the banking system, all through the major corporations of those countries. That destabilized the world around this decade, and for many years to come, because people didn’t get that money. These institutions, their leaders, their associates, they got that money. They used that money into the financial markets, but not into the real economy.

    The CBs “conjured electronically” the reserves: the banking oligopoly kept them as excess reserves (gaining no-risk interest), wrote off bad debt, or bought failing assets to prop up the markets. Any profits they made: they used to inflate their own worth via share buybacks. For this, the Fed gave their permission:

    And then ultimately what they’ve done recently is use this cheap money and the Fed’s permission—’cause they have to ask the Fed for permission to do this—to buy their own stock. So for example, last year, 99 percent—that would be almost all of the profits of the largest banks in the country who were subsidized by this $4.3, $4.5 trillion worth of conjured money to buy assets from them by the Federal Reserve—used 99 percent of their profits to buy their own stock. And that came out of a report that was discussed in front of Congress by the vice chair of the FDIC at the time, Thomas Hoenig, who has all of that data available to him, and said look, basically this is where the money is going. It’s not going to restructure, forget mortgages 10 years ago, it’s not going to help anyone right now; that is profits that could be used to help customers, that could be used to work with the government, even, to develop infrastructure, research development projects, whatever—it’s not. That money is going into their stock, and their shareholders, and their senior managers.


    Paul Craig Roberts has written cogently about the real world situation:

    The way the Federal Reserve saved the irresponsible large banks, which should have failed and have been broken up, was to raise the prices of troubled assets on the banks’ books by lowering interest rates. To be clear, interest rates and bond prices move in opposite directions. When interest rates are lowered by the Federal Reserve, which it achieves by purchasing debt instruments, the prices of bonds rise. As the various debt risks move together, lower interest rates raise the prices of all debt instruments, even troubled ones. Raising the prices of debt instruments produced solvent balance sheets for the big banks.

    A country whose population is this indebted has no consumer market. Without a consumer market there is no economic growth, other than the false orchestrated figures produced by the US government by under counting the inflation rate and the unemployment rate.

    Without economic growth, consumers, businesses, state, local, and federal governments cannot service their debts and meet their obligations.


    This is the real world situation: the CBs are conspiring to inflate the wealth of the asset owning superclass by financial engineering that is destroying economies. Reserve creation has had no effect on money in circulation (which has fallen). What you are saying amounts to theoretical economic semanticism, which only holds true only if you conflate “government spending” with CB reserve creation. Only, I’m not sure that holds true at all? It is just as valid to say the CBs are ‘electronically conjuring’ reserves with no reference to spending or taxation …”out of nowhere” as Nomi says. The common terminology is “printing money” (even though it is electronic CB reserves). Whether you contend that it is the sovereign government “printing money”; or, as I contend, that it is the supra-sovereign BIS/G7-CBs/TBTF/TBTJ banking cabal “printing money” – over and above the government (who nonetheless consent) – matters little. What it amounts to is the theft and foreclosing of the future. That’s my final word on it.

    • John G says

      Absolutely nothing to do with MMT or the subject at hand. The BIS does not create currency like sovereign governments do. It has no real power, whatever influence it has.

      It is ironic indeed that you claim that my position is theoretical.

      MMT describes the system as it exists in the real world. All money is ‘conjured’.

    • Central banks generally don’t spend reserves into the system. Only government fiscal outlays do that.

      Try reading the Het economist link that you’ve ignored so studiously.

      Until you are prepared to learn you are detrimental to any left politics.

      • BigB says

        That is really quite offensive, and also factually wrong. I did read the Het economist, in fact I read about a dozen articles on there. Your arrogant assertion that I do not know the MMT position is also wrong, in fact I am reading “Reclaiming the State” by Bill Mitchell. I’ve only just started so I can’t comment yet, so I’ll have to get back to you on that.

        Suffice to say, I am in general agreement with MMT. That said, I’m beginning to take a dislike to the supercillious attitude of fundamentalist MMTers, looking down on the unwashed and unenlightened from their intellectual Ivory Tower. My experience is that MMTers will take no criticism. Even from Steve Keen, who broadly supports the theory too. There appears to be the need to model MMT in a sectoral analysis to understand if any credit/demand/income leakage that may occur in international trade. Not every country can run a trade surplus (surplus-deficits net to zero): so there may be a need for additional mechanisms of balance (like a modern Bancor)? Along with Keen saying, as I do, that MMT should start with the banks creating money – the “exports=cost, imports=benefit” debate seems a valid, reasonable, and constructive criticism? Not according to some of the MMT commenters: Keen is a charlatan and does not know what he is talking about. You always know when someone has a valid point when the response is limited to ad homs?

        I took the considered effort to lay out a reasoned argument that banks are indeed sovereign, if not supra-sovereign. Your response is that reality is a strawman and red herring. I read the Het economist: will you read Nomi Prins? I may not know what I am talking about, but Ms Prins most certainly does. I, and several others have tried to engage in reasoned dialogue, but your dismissive responses each time are that we are wrong and do not know what we are talking about. If you will not engage, or answer some quite fundamental and valid specific criticisms: who is the detriment to left politics?

        The real bottom line is that Nature is the sovereign issuer of currency, and the only central bank in existence. Ecology and economy start and end there …and yes, you can take that to the bank!

  6. “Hohoho, what a jolly breakfast discussion .. ” said Le Baron

    “I didn’t say we aren’t gonna get our hair mussed”.

    Nice one, Mulga 😉

    It would appear to Balky, that there is more than a little financial confusion going on here, (Rothschild & Co.’s agenda, incidentally) , judging by the comments below: so, some might appreciate something credible as a reference pointer , from an historical perspective >>
    A worthwhile read: from Richard Werner –


    because, everything-everything is about to change, again, before Dec. 2020: given the impossible state of Sovereign Financial Affairs presently, (after 100 years of economic stagnation & the Dollar Hegemony of the Creature from Jekyll Island of Ponzi Schemers), it was inevitable, unavoidable and anybody who thinks that the biggest makers & shakers of markets have not been planning on how to rein in & regain control is ‘Delusional’ .. and it will defo. involve a new system of Distributed Ledger Funds i.e. The Blockchain of IMF SDR currencies , first exclusively for Central Banks !

    Yep, & you read it first in the OFFG 😉

    Curiously, Nobody ! ? seems to have even mentioned the Blockchain Tech. ready to rock & rollover markets: even though we know that all Government Debt Clocks are ticking faster & faster out of control, as are Pension Fund obligations and even the IMF & WBO cannot deny this : thus Christine Lagarde’s position & solution regarding Greece was inevitably basically pretty much in full agreement & alignment with that of Yanis Varoufakis & what he , almost alone publicly , was originally suggesting as a solution to the Greek debt crisis and this was revealed / Leaked from the IMF , on the Thursday before the Greek “OXI” vote in the 2015 National Referendum: a referendum which cost the Greek Economy 20 million Euro & the result was then subsequently completely ignored by the coward & traitor Tsipras, who then did the exact OPPOSITE of what he was instructed to do by the Greek People , who had voted democratically with a 62% majority ! !

    So much disrespect for Sovereign Budgetary Control was Historic ..
    let alone democracy ! ! ?

    ( & it was the cue for distractions & ramping Terror Attacks, like Charlie Hebdo immediately prior to Syriza & then Le Bataclan Friday 13th Nov. attacks, immediately after ‘The Greek Affair’ .. no surprises there, all so predictable and Balky did advise in advance .. )

    Imagine 62% voted for Brexit and Cameron then stayed on as PM , but refused to initiate Brexit, after the 52% majority referendum and said

    “Hey, we’re not leaving the EU , anyway, coz’ I’m scared of Schaeuble & Co. and I like being PM ..” >>>

    Tsipras should have been arrested, imho ! ! & still should be, honestly speaking ..
    For wasting 20 million euros &&&
    A National Fucking Disgrace that proves ABSOFURKIN’LUTELY Unfurkin’equivocally
    that democracy in Europe NEVER existed ..
    Not even in Greece, Homer’s home of ‘Homeys’ democratic desire.

    No surprise that Varoufakis resigned, immediately, during the night of Winning the OXI Referendum and i recall just how slow the Guardian was to report the appalling reality & perversion of any & all democratic will of the Greek people: the Guardian trying desperately to ignore , cover up & distract from Varoufakis and his conclusions (like the IMF) and all the mainstream media playing down the complete democratic failure, (worthy of revolt) , undermining Greek Democratic National Sovereignty, clearly: i recall so clearly, because it was I that had to publish Varoufakis’ immediate resignation in the CIF comments section of the Guardian, on that infamous night & rude awakening on that sunny July morning, due to the Failure of Helena Smith, the Guardian and so many others, to face the true reality & report ACCURATELY & with INTEGRITY .. ! ! The day the Guardian Died > Fact

    (I digress), but there was truly so much to learn from the Greek Debt Crisis & yet it appears very few have analysed and taken away the requisite salutary / sobering lessons, on reflection.


    The above link, whilst referring to the UK debt clock specifically, will lead & inform you for all nations, with a quick ‘click’ here & there, you have it >> and the IMF knows damn well that there is hardly a nation on earth that can meet its’ debt repayment requirements, within the realms of present financial market designs & constraints and most importantly I must emphasise one thing especially ..
    (which jag37777 seems to have NOT thought through, responding to Big B )

    Almost Every single government worldwide would be BANKRUPT tomorrow, without their ‘daily bread & butter revenue’ .. from the Energy Sector >> itsa’ fact ! Do the math, coz’ Oil companies have & Oil companies know this very well & exploit this reality, when .. Leveraging & Lobbying Politicians ,
    even for a Regime Change !!!

    Think on that .. & then this:-

    All told, U.S. states and local governments have about $2 trillion less than what they need to cover retirement benefits.

    That’s not a typo: $2 trillion in the hole ! !

    And the sad truth is that gap simply can’t be filled & .. >>
    It’s a ticking time bomb that cannot be defused by such absurd present systemic financial machinations, where too big to fail and “Socialism for the Rich” RULES !

    Good luck,

    P.s. You and I will NOT be able to access the IMF SDR Distributed Ledger Blockchain solution that will save the Central Banks, again ! Effectively more “Socialism for the Rich” , as Nobel Laureate Stiglitz highlighted, just after the FED’s $16.2 Trillion universal bank bailout created in 5 working days, in 2008 .. only this time the central banks have copied Bitcoin designs and destabilised Bitcoin by watering down the Bitcoin market that was soaring: & by creating the first ever Crypto-Currency ETF in Chicago in Jan’ 2018, regardless of what Mr. Morgan has said , the Blockchain IS the only solution for Central Banks to keep their elite positioning and still control financial futures ..

    Central Banks way TBTF , of course !

    Lol: Who in hell could possibly imagine that Governments ever controlled the economy, commodities or the money supply in the West ? Lord Rothschild & Monsieur Morgan plus a few others, would be highly amused by your stupidity & naivety .. I mean, the very notion of leaving economic control in the hands of politicians and a democratic government of Serfs , like Syriza , even after a referendum !
    No way .. José
    are you bonkers ! ? 🙂

    “Dass geht nicht..”, I imagine Schäuble saying, quite emphatically .. ” Ruf ‘Das Mädchen’ .. ”
    & tell her the ghost of Helmut Kohl would like a patronising word ! 😉

    Forewarned is forearmed > Interest rate rises & inflation G’teed , Bayer d’way .. !

    P.P.s. Helena Smith, if you ever get to read this, imho , you appear to be still to this day, a complete & utter ‘Bimbo’ and every word you have ever written on Greece is utter ZioNazi cobblers ! & all as a direct consequence of your completely dumbed down & brainwashed mindset & your appalling standard of journalism, bent on presstitution , void of principle .. yep, Helena of Troy, joy of joys, after 40 years of Media Research & Analysis, I can honestly say you are the WORST, least educated & least cognisant journalist I have EVER encountered !!! Take the biscuit for pure prostitution ..

    Have a Garibaldi .. 😉

    “Garibaldi was very popular in Italy and abroad, aided by exceptional international media coverage at the time. Many of the greatest intellectuals of his time, such as Victor Hugo, Alexandre Dumas, and George Sand, showered him with admiration. The United Kingdom and the United States helped him a great deal, offering him financial and military support in difficult circumstances.” (Wikipeado)

    Time to Muss the Hair, Mulga 😉 ! ?
    Balky’s Mumblebrain modulating ..

    • BigB says

      Balky: have you got a reference for the blockchain SDR: or is it your own theory? I’m not questioning it: I also believe the SDR is the endgame for ‘global economic governance’ …only I had not linked its potential commercialisation to blockchain technology. Thanks for the heads up! 🙂

      • Big B says

        Balky: the latest 2018 BRICS declaration commits to Distributed Ledgers and crypto …you may be on to something!

  7. Big B, banks DO NOT and CAN NOT create reserves. Only government can.
    Reserves are the currency units used within the payments system between banks and between government and banks.
    Government spending creates reserves and taxation destroys them. Selling bonds reduces reserve balances, redeeming them increases reserve balances.
    Bank lending nets to zero. For every unit of bank credit there is an equal debt.
    Government bond sales do not create bank credit. Bank balance sheets do not expand with bond purchases.
    Learn the difference between horizontal and vertical money and think about the balance sheet.

  8. The author asks, “But can it work?” in reference to MMT. It already does. MMT does not describe an option; it describes the current reality of countries which use a modern fiat monetary system (so not the eurozone nations). While it is correct that banks create a lot of bank deposits through their lending activities, they do not create all of it. The government already issues (and revokes) currency daily. This is what spending and tax operations are: crrency issuance and currency revocation, respectively.

    The problem is not that banks lend money and thereby create deposits. The problem is that the government relies too much on bank lending to drive aggregating spending in the economy and employment. It sits on its hands instead of taking an active part through its own spending and taxation decisions. That is basically the heart of neoliberalism: the government stays out of the economy. Of course, as the issuer of the currency that the domestic private sector uses, the government necessarily has a huge economic role to play, a role which cannot in fact be avoided.

    It is this avoidance which is most responsible for the global financial crisis, which at root was created by a currency shortage. One can only rely on bank lending so long before everybody is up to their eyeballs in debt. When that happens, defaults begin, spending collapses, and lending activity stops. Enter the government to provide its stimulus. Of course, government should not only be waiting around for crashes in order to spend its currency into the private sector. It should be constantly regulating aggregate spending through its own spending and taxing powers. That’s what sane economic policy looks like.

    Neoliberalism is not an economics view. It is the political agenda of the finance sector (currency shortages create customers looking to borrow). It is not an economically reasonable way to govern a nation.

  9. Big B, nobody in MMT is conflating anything. You are confused. ‘Reserves’ are currency. They are the government money in the payments system.

  10. To Jen.

    Bank credit does not buy government bonds. Only government money (reserves) can buy bonds or extinguish tax liabilities.

    When a government bond is bought, there is a corresponding decrease in a reserve balance. i.e. no money created.

    When a bond is redeemed that amount returns to the reserve accounts.It’s a ledger transfer only.

    Bonds DO NOT raise revenue. They are merely savings accounts.

    You need to understand the difference between currency and bank credit. Vertical vs horizontal. Not all money is equal.

    • I’m highly disturbed that this factually accurate comment has been voted down nine times. (I just gave it the sole thumbs up.) The content of this post is absolutely right, and it is critical that leftists understand how fiat monetary systems operate. It would be appropriate for somebody who does not understand this to ask questions, so that the left’s misunderstandings of how the monetary systems work can be cleared up. Socialist policies simply cannot be enacted absent a proper understanding of this.

      • Calgacus says

        Yup, I just voted it up too. The problem is that people confuse themselves so much with irrelevant details that they start arguing perfectly crazy positions. The details might be true, about how the evil corporations and whatever corruptly control the government, but that doesn’t change the fact that their control is exercised only through corrupting the government. Therefore, bad guys have NO power over a non-corrupt government that understands how things work = who understand MMT or (true) Keynesist/Kaleckian/Institutional/Creditary/Circuitist economics.

        Instead, people insist that the simplest tautologies are not true. Government money and government bonds are different from private bank money and private bank debts, because governments and banks are different entities. A pound note is different from a dollar bill. One is a UK government obligation, the other is a US government obligation. But too much of the left here misunderstands money as badly as someone who thinks Trump is the Queen-Emperor of England and Elizabeth is the Prime Minister of America.

        And if you point out how crazy the crusade against tautologies and logical, accounting truth is, you become a purveyor of abstract theory that ignores the “real details”. The “real details” are actually the finance sectors magicians’ smoke and mirrors, that they confuse people whose eyes have long since glazed over to agree that up is down, etc. It takes books and papers — or trust in common sense and logic — to see how the smoke and mirrors after all is nothing but smoke and mirrors.

        • John G says

          It’s alarming that the private Fed tales are gaining currency on the left too.

          • Big B says

            John G: perhaps you would like to explain the concerted actions of the G7 CBs acting within their mandate as democratic state institutions? Or the public Fed authorising share buybacks for the TBTF banks? Our destroyed economies are the evidence that the Fed and the other CBs are acting for private – not public – interests.

  11. Rhamphotyphlops says

    It is very good to see OffGuardian posting some economic discussions, as in the end this controls so many of the other issues that they discuss here.

    I agree with the author that money is currently created by banks and there is no reason that this could not be done by the government. The main problems with banks creating money is that it is in the form of credit with accompanying interest charges that go back to the banks which have do nothing productive to earn them. The other problem with banks creating money is that they do so solely on the basis of whether it makes them money, with no consideration of credit bubbles or whether the money is even being put to productive use rather than creating housing bubbles, which then inevitably collapse causing a lot of pain for the population that it is inflicted on.

    However, the main problem with banks creating most of the money as credit with attached interest charges is that it is mathematically impossible for it to continue. All the money that is created by the banks has to be paid back to them along with the interest charges that are continuously accruing. That means that more money needs to be paid back to the banks than they created in the first place. The way that banks get around this is to create an exponentially increasing amount of debt. However, you get to a point where the populace becomes saturated with debt and can not afford to take on any more even with the historically low interest rates that currently exist in the west. That leaves only a few options, either their is a debt jubilee as occurred historically throughout the world or as the financial institutions would prefer there is mass bankruptcies and they get all the assets. Michael Hudson’s book ‘Killing the Host’ has some good chapters on this.

    I think that the author is not ambitious enough with his approach though, and trying to implement MMT as it stands would fail. Here are some other things that should be considered as of any package where governments could get back in to money creation.

    Should banks (or any non government entity) be able to create money?
    My opinion is no, and the government should also create money unencumbered with attached interest charges where possible as well. By money I mean what a country will accept as payment for any taxes or levies it issues. I have no problem with private entities creating their own private currencies such as frequent flyer points, but they should receive no government assistance when they self destruct.

    Should usury be allowed?
    There are a lot of good reasons why this parasitic practise was banned for significant portions of human history. I’m for banning it outright but at worst it should be restricted to governments only, and the income from usury used to offset taxation on labour that is involved in the generation of goods and services.

    Against whom, and how should taxes be levied?
    Even if Governments could create money for all their spending needs there would still be a level of taxation required to restrain inflation (unless of course the money created had an inbuilt time limit for its use). Taxation currently falls most heavily on those earning an income by working to produce goods and services for use by others. While those that do nothing for their income such as money made from capital gains, investments, interest and monopoly charges and so forth is generally taxed at a lower rate. Earned income should have minimal taxation and especially not for low incomes while unearned income should be taxed brutally, particularly when it is gained through the exploitation of the general population.

    Should free movement of labour, goods, services and capital be allowed?
    I would argue that all of the above should be significantly restricted. I have waffled to much so just one quick example. For example, the ability for labour to strike and ask for better conditions is greatly reduced if their is mass immigration of willing replacement workers or companies can outsource the manufacture of goods to where labour costs and working conditions are lowest, with no tariffs to offset the difference in labour costs on imported products.

    What form of government would allow these or other ideas to be implemented?
    The current for of representative electoral government practised in the west is clearly incapable of delivering any redistribution of decision making power to the majority. I prefer direct democracy, and by that I mean a real more involved version for the populace, not the pseudo-democratic version the Swiss practise.

    Is the media too corrupt and beholden to rich owners/donors to allow effective communication of ideas around the populace?
    Yes, but there is the is the occasional piece of resistance such as OffG. It is the inability to get any truly profound ideas discussed amongst the masses that is the real limiting factor for change. The MSM does a magnificient job of distracting and confusing the majority that have not been able to escape their clutches. Although there is hope with regular surveys showing that journalists are one of the least trusted occupations somewhere between paedophiles and politicians.

    Etc, but this post is already rudely long, so ill stop.

  12. ‘Positive Money’ and MMT are not the same. PM have a rather odd monetarist view of the system.

  13. ron says

    sovereign brexit now – that’s what we voted for – may should be arrested on grounds of treason and her cabal should be imprisoned for life – BREXIT NOW – nothing less

    • Perhaps balky agrees, but how the hell do you think the average Greek feels, given that they voted in their referendum with a far more distinct, definitive and qualitative NO / OXI , with a 62% Majority on financial matters .. and then the Traitor & Coward Tsipras, went and did the exact opposite , after spunking 20 million euros on the referendum ..

      He should not just be arrested , IMHO , he should be imprisoned indefinitely on Mykonos, chained up in a local nightclub and waterboarded daily , until he gives up every single name and repeats for the record, every single word of those external forces that leveraged and swayed him to sacrifice ALL democratic principle ..

      “mememe” or You you you guys in the UK really have had yer’ heads in the sand for way too long and have truly not been paying attention to Market Forces of E.i & A.i. and i reckon the only thing that will gradually increase UK global awareness is a Leveson 2 inquiry ..

      Which dis’May just cancelled , very quietly ..

      So you can add that to the huge list of her offences against all & sundry ..

      Muss yer’ hair , down Parliament Square .. 😉 Get stuck in .. 🙂

  14. Seamus Padraig says

    If anyone wants an example of something like MMT in action, just consider the case of the People’s Republic of China:

    1.) All banks state owned and not for profit – no finance sector parasites
    2.) Tightly controlled currency – no free-floating exchange susceptible to speculation
    3.) Select controls on buying/selling (e.g., residential real estate) to prevent inflation

    Of course, there’s more to it than just that; MMT in this case is just part of a larger package of ‘socialism with Chinese characteristics’. It remains to be demonstrated that such a system could ever arise in another political context. China, after all, is unusually large, doesn’t have much immigration, and has had for some years now a booming export sector … therefore hard to imagine such a thing working in modern Britain, for example. But I believe that it’s very similar to what George Orwell once called approvingly ‘patriotic socialism’.

    • Mulga Mumblebrain says

      China also has a single party of power that any can join and rise according to one’s abilities. There is no fraudulent ‘multi-party’ crap, that only breeds division and partisan hatreds, classic Divide and Rule tactics, while REAL power resides firmly with the owners of the country. And Chinese leaders follow old Chinese governance principles melded with socialist principles where the benefit of the public is paramount, and, if neglected, the Mandate of Heaven is lost, or as Mao said, if the Communist Party becomes corrupt and antagonistic towards the people, like the situation in the neo-liberal West, then the Chinese people will just make another revolution. The contrast between the dynamism, sanity, effectiveness and forward-thinking of the Chinese system and the insane and morally repellent social division and hatred, grotesque and growing inequality, psychopathic social savagery and class, race and sectarian hatred and geo-political aggression and genocidal destructiveness of the ‘Free World’ is there for all to see. No wonder that the Evil scum who rule the West despise and fear China so much, and are so determined to bring it down.

      • Maggie says

        China and Russia both appear to have the right idea.
        Here is what Russia does with greedy parasites:

        I came upon this information whilst researching the ‘monster’ Putin?

      • BigB says

        MM: Dr Tim Morgan has recently blogged about the cost of maintaining China’s ” grand bargain” of promised future prosperity – a growing debt dependency creating a monumental and unsustainable habit for an economic credit junkie system. Borrowing 30% of GDP per annum (down from 38%) to create 6-7% growth is not going to make anyone rich in the long term. In comparison, America’s 5.8% borrowing looks quite modest? Of course, very little of that will go to citizens, other than a relative few Trump supporters …to feed the powerbase. Unfortunately, the neoliberal Chinese Dragon is the engine of the coming global crisis; compelled into expansionism whether it is profitable or not; heading to precipitate GFC II …if Italy don’t beat them to it?


        • Mulga Mumblebrain says

          I rather suspect that the Chinese Government know precisely what they are doing. Not to insult Tim Morgan, but predictions of China’s imminent collapse have been a staple of the fakestream media for as long as I can remember. The mucilaginous compradore Gordon Chang has made a career out of it for thirty years, and he still appears on TV spreading his racist poison. These Sinophobe creeps even fail to comprehend the law of large numbers that explains why China’s growth rate ‘falling’ from 10% plus to 6.something is inevitable, and no sign of anything untoward.
          My confidence in the Chinese is driven by two factors. One, that their meritocratic, utilitarian and non-exploitative, in foreign relations, system is vastly superior on every level to the psychopathic destructiveness of end-stage neo-feudal Free Market capitalism in the West. And, second, that they are the only great power actively planning to create an ‘ecological civilization’, that will survive in the long-term, whereas, in the West, the ruling Rightwing psychopaths in business and their employees in politics and the fakestream media lie-machines, hate environmentalism with an ever growing fury, and utterly refuse to address the deepening ecological Holocaust. So, I see China as humanity’s last, slim, hope, for survival beyond 2050 at the outside.

          • BigB says

            MM: with respect, what you call an Ecological Civilisation, I call hell on earth …the very antithesis of a human scale, embodied human/nature, and holistic ecology. Search for ‘Global Economic Governance’ and you will see that the Ecological Civilisation is a euphemism for neoliberal globalisation. China are not presenting any alternative: they are part of the Club. If you read any of the BRICS or SCO declarations that I have posted, you would know this. There is no secret, the declared path is integration and globalisation under the current ex-Bretton Woods organisations, and full commitment to the WTO …it is in all their shared literature.

            I has I have also said before: the end game is for a basket of currencies to replace the dollar as the reserve currency. This is a bankers wet dream (fully backed by the likes of Soros) and humanities nightmare. Every country will need to hold SDRs; every country will be controlled. Every country will be a vassal of a centralised power …under the current UN/WTO/WB/IMF or replacement ‘democratic’ organisations matters little. All Russia-China want is a better seat at the table: some alternative?

            China is driving the ecological holocaust, not saving us from it …making shit to fulfil and fuel peoples false consciousness wants, needs, and desires; to fulfil a ‘Grand Bargain’ that makes no profit and Nature cannot afford to prop up the shortfall, or eventually allow them to keep; shit exported thousands of miles to deliver a sense of false prosperity to those in dire spiritual and actual poverty, to pacify and stop them revolting; bought with debt-money they do not have, and Nature cannot to fund, or afford to allow them to repay; shit commodities that are discarded – or returned for e-disposal – as unfulfilling as soon as they arrive, after a 3,000 mile journey on unsustainable and polluting global distribution networks; that contain enough embodied energy for an indigenous family to live for a year (before they were evicted to build another dam to make more shit…) …all to impress people they do not like, and convey status they do not have; leaving them feeling empty …so they buy more shit…

            And yes, as we are talking about MMT: China can keep this up as long as it likes – if it keeps all debts denominated in RMB. Only, contrary to popular opinion, China has liberalised as part of its SDR strategy – and not all debt is in RMB. Foreign and private debts matter, as Steve Keen says.

            China is risking all to fulfil a Grand Bargain it ultimately cannot afford to sustain, or in the end keep. So much for an alternative, my friend (not sarc!) …and the real loser is Nature. Perhaps you would like to redefine ‘Ecological’?

            • Mulga Mumblebrain says

              Youtube is full of videos describing Chinese actions to clean their polluted waters through natural means, reforest huge areas (in Sichuan so extensive that local CO2 levels are often 50 ppm lower than in other parts of China because of the trees utilising the CO2)introduce electric buses and cars, install huge wind farms, solar energy, actual CO2 capture and sequestration, or utilisation in growing algae or making concrete etc. I could go on all day, and you can also see discussions with Westerners who have been working with the Chinese on ecological repair for decades. In my opinion your attitude is too Manichean, but I’m in no position to accuse others of that. I agree with much of your diagnosis, but I believe that there is a silver lining to the dark cloud of neo-liberal capitalism in China, whereas in the West the picture is dark, and growing darker.

              • BigB says

                Where is the silver lining in neoliberal globalisation? Much less so in Global Economic Governance? Surely that needs no deciphering as to its implications. Do we really want a global single free trade zone, subsumed sovereignty, borderless nation states with free movement for labour, goods, services, and last, but not least – capital?

                China could use MMT to finance ecological reparations – without globalisation.Without exporting its overcapacities to turn SE Asia into a giant carpark: they could instead invest in the knowledge, wellbeing, health, etc of its citizens without opening up to the vagaries of FDI, H-bonds (floating SOEs on HK and Macau exchanges, as their own are too systemically fragile – see below), capital flight, or unsustainable debt. And contrary to some commenters, the debts are not all in RMB – so they are unsustainable.

                China is clearly following free market strategy and NCE – and we know how that develops?

                The Chinese invented philosophy when my ancestors were wearing woad and strangling would be Kings and throwing the bodies in the bog. As Lao Tzu said to Confucius: “never let the dollar in”. Stick with the RMB internally, no need to liberalise or follow a policy of regional hegemony and subservience to the dollar. Fund the health, happiness, and future ecology of the people – not the vulture capitalists. Love the Dao (not the Dow)? Harmony with Nature: the Chinese invented that too …

                “Be Content with what you have; rejoice in the way things are. When you realize there is nothing lacking, the whole world belongs to you.” Lao Tzu.

                A truly Ecological Civilisation does not Global Economic Governance? Quite the opposite.

                • Mulga Mumblebrain says

                  The Chinese are doing fantastic things to reverse the ecological devastation caused by the economic growth required to avert Western aggression. They are precisely and heavily investing in the knowledge, wellbeing and health of their people, and in Africa etc. Wherever did you get the idea that China was not investing in knowledge, where its education system is hugely successful, well-being, where Chinese wages and consumption, foreign travel and access to resources has grown markedly for decades and health, where, after years of private provision designed to drive domestic savings? China is expanding a national health insurance system. And the idea that Chinese social progress could be de-railed by FDI, bonds or capital flight is, in my opinion, plainly misguided. As for Chinese debt, that is the last refuge of the ‘China’s Fall’ brigade, I fear/

                  • BigB says

                    MM: re-read what I wrote. I was drawing the distinction that China could do all those things, WITHOUT them being contingent on neoliberal globalisation or global economic governance …or foreign finance (FDI). I agree, perhaps I should have emphasised ‘continue’ to do such things, as you correctly point out. But they could, and should, continue to do all those things funded by sovereign RMB. They do not need to liberalise or open up to foreign capital. Nor do they need to open up to private capital internally – which has been policy since 2013. My point is that neoliberalising jeopardises everything long-term. Foreign and private debts matter. Being a dollar vassal is economic suicide. And neoliberalisation will drive inequality, not equality …a point Michael Hudson recently made, in China, to the Chinese. Fuck the SDR, fuck globalisation, double fuck the dollar, and triple fuck Goldman $uch$ – don’t let them in. There are more ways to fund knowledge and wellbeing than neoclassical economics and free markets: China should learn from the economic devastation they have wreaked in the West, and train its own economists in MMT …or read Volume III of Capital:

                    ” His point [David Harvey’s] was that the Chinese should read Volume III of Capital to understand why and how the volume of debt and credit grows exponentially. As banks get richer and richer, the One Percent get richer.”


                    As for China’s debt: why are they risking everything by opening up to FDI and internally to private equity? No one seems to know the answer; other than all their economists were trained in free market fundamentalism (NCE) by Goldman $uch$. Re-finance any foreign or private debt with RMB: and don’t let the ‘China’s (self-inflicted) fall’ brigade have their day?

                    China is playing an economic version of ‘spinning the plates’ with its various (collapsing) asset bubbles – trying to fight asset deflation, within falling demand and market contraction. It is countering this with interest rate cuts, Ponzi finance, and opening up to foreign capital. As Michael Hudson said: it doesn’t need to be this way?

        • Seamus Padraig says

          China’s ” grand bargain” of promised future prosperity – a growing debt dependency creating a monumental and unsustainable habit for an economic credit junkie system. Borrowing 30% of GDP per annum (down from 38%) to create 6-7% growth is not going to make anyone rich in the long term.

          You are misinformed. The Chinese govt. is the world’s largest creditor, not debtor. As far as all the ‘Chinese debt’ that the Wall Street Journal is forever going on and on about, that’s just a bunch of funny-money that state-owned Chinese corporations owe state-owned Chinese banks. Big deal. It’s no different than the US Treasury Dept. ‘owing’ the Fed; for that matter, it’s no different than your left pocket owing your right pocket some money. Meanwhile, the average Chinese consumer or private company caries much less debt than their counterparts in America–by an order of magnitude. And China’s sovereign debt is zero. Think about it: have you ever heard of a Chinese government bond?

          • Big B says

            I was quoting Dr Tim Morgan: so it is his analysis that you dispute. You may have missed the part-privatisation of SOEs in 2013, and neoliberalisation of Foreign Direct Investment – not all debt is state to state or denominated in RMB. Private and foreign debts matter, as Steve Keen says.

            I would further recommend you to Jack Rasmus’: Sytemic Fragility in the Global Economy. He dedicates a whole chapter to China: titled “Bubbles, Bubbles, Debt, and Troubles”. He details China’s ‘triple bubble machine’ economy. Bubbles in real estate: corporate junk bonds and refinancing older SOEs; and its internal stock markets (Shanghai and Schenzen). All three are being financially engineered to shore them up and prevent contagion …so far, so good: but is is sustainable and expandable?

            I’m afraid your analysis is outdated. No, I have not heard of a Chinabond …but I guess I soon will. 🙂

          • Calgacus says

            If you google “Chinese government bond” you will get a lot of information on them. About 10+ trillion dollars of bonds, the third largest bond market in the world is not zero. As others note below, fixing currency rates (too high) is a problem that has wrecked many countryies, like Venezuela who practice this insane policy. Too many people reverse the cure and the disease: Fixing causes damaging speculation. (And enriches finance.) Floating prevents it. (And allows for growth and development)

    • None of the factors you mention have anything to do with MMT.

      First, MMT does not have anything to say about whether banks should be nationalized (although I certainly think the government should operate a national bank). But MMT has nothing to say about the existence of the finance sector, and its advocates do not oppose bank lending generally. However, a government that understands its real spending capacity and utilized it to create full employment would certainly have the effect of reducing the size and influence of the finance sector, which, in my opinion, is a good thing (and even a necessary thing). Otherwise, the finance sector’s activity would be curtailed by good, old-fashioned government regulation, the way it was before neoliberals took over power.

      Second, MMT actually assumes a floating exchange rate, which it considers essential to a modern monetary system. The exchange rate only affects the domestic nation’s capacity to import and the attractiveness of its exports, but by letting the currency float, the government has maximum policy space to pursue domestic full employment, which is the most critical thing both for economic growth and to promote social cohesion (unemployment is bad for mental health and crime). Speculation can be combated in other ways; it does not require pegging a currency.

      Third, MMT has nothing to say about placing any limits on purchasing and selling things. Inflation is regulated via the government’s fiscal (i.e., spending and taxing) powers.

  15. BigB says

    Nature cannot afford the lifestyle we aspire to: it is just that simple. Even if it could: we still do not have a funding or capital creation crisis (not with virtually ‘free’ ZIRP credit and finance) – we have an allocation and distribution crisis. We need to do much more: with much less – more equitably, ethically, and globally distributed.

    We are in ecological overshoot, depleting even supposedly renewable resources (such as forestry and fishing) with our current rates of cannibalistic consumption; creating an unsustainable materialistic lifestyle for around 14% of the global population; of whom, only the upper one percent see the profit. Yet there is plenty of capital available: only, it is unregulated and liberalised to seek the highest return – as bonuses and dividends, share buybacks, mergers and acquisitions, leveraged buyouts, or gambled on exotic derivatives. Returns flow offshore through secrecy jurisdictions (facilitated by the like of the City of London Corporation) without ever touching the productive economy, infrastructure, or social welfare programmes. Our schools, hospitals, and future wellbeing belong to shadow banks and shell companies – that belong to shell companies – situated in the Isle of Man, Guernsey, and Jersey (we recently closed the Caribbean down: will the City follow shortly?).

    And it all comes from the magic money tree!

    Between 2000 and 2017, [global] GDP (as reported) increased by $55tn (76%) in real terms. But debt more than doubled, growing by 126%, or $152tn, from $121tn in 2000 to $273tn in 2017.

    Borrowing $152tn to achieve growth of $55tn is not only unsustainable, but surely makes it clear beyond doubt that most of the supposed “growth” in GDP is simply the effect of pouring borrowed liquidity into the economy.


    Creating money by debt funding does not seem to be a problem? What to do with it – in terms of creating equitable distribution and relative prosperity – is the real problem?

    The magic money trees have conjured $28tn for global QE; $247 in global debt [318% of GGDP – IIF]; $750tn derivatives exposure [BIS]; and perhaps $100tn pensions adequacy impairment [see link]; at least $70tn of which is sitting idle ‘offshore’. No worries about the debt: we’ll just roll it over and refinance say the IIF …so long as interest rates do not rise and there is no (continual) secular stagnation. Make hay while the sun shines, say the IMF. We’ve never had it so good, says Stephen Pinker …


    Our entire money paradigm is becoming divorced from reality. We are debt funding fictitious GDP ‘growth’ (Gross Delusional Prosperity?) and the bill is being funded by the death and depletion of the planet (Gross Destructive Potential?). At the heart of this fiction is a grove of evergreen money trees: where productivity is an econometric Cobb-Douglass production equation that creates output as a function of only capital and labour; where undecaying goods and services flow immortally from factory to household in perpetual cyclical (symbolic) exchange: validity is the (engineered) rising of stock and rollover of debt – without ever there being a need for impairment of biophysical inputs from the environment; entropy of commodities; or heat and waste outputs to sink …because there are none in Neo-Classical Economics (NCE). [Hall and Klitgaard].

    If this seems ridiculous, that’s because it is. Yet it is also pernicious and pervasive: virtually everybody believes a version of this counterfeited fantasy – and have their hopes and aspirations defined by it. Our entire political economy is predicated on this illusory foundation: it is the job of the political class to sell us the Continual Prosperity Myth. They are not lying or misrepresenting: they believe in (a modifiable) faith-based fantasy of sustainable perpetual compounding growth, infinite resources, and inexhaustible and auto-regenerative sinks. There are no depleting biophysical inputs; no waste and pollution outputs to sink; no entropic degeneration of cyclical goods and services; no biophysical boundaries or limitations. The NCE political economy is an environmentally unbound self-maximising, self-replicating, self-generating (autopoietic) system that will generate returns and materialistic prosperity forever – because They say it will. And the Faithful (their ‘communal consensual constituency’) continue to believe. Even when the IIF warn that the economy is overheating: they still believe that after a “price correction” or a “re-adjustment”; that short-termistic, materialistic prosperity will return. If only we keep the Faith and continue to legitimate the unvalidatable, proof-free absurdity and Believe?

    As Charles Hall has put it, “I do not know how to make the dinosaurs optimistic about the impending meteor”? So long as the political economy remains decoupled from its biophysical matrix: the Faithful will continue to believe in a such a future. To which, the UK is already a menopausal basket case economy. From Dr Tim Morgan again: we a borrowing £5,450 to create £1,000 GDP – for how much longer?

    We need something more radical than a new way of accounting or funding the same old tired and irrational projected fallacies (MMT): we need a new structurally coupled ecological economy: one that takes account of biophysical inputs and waste and pollution outputs; equitable distribution; and regenerative balance with Nature. Along with that comes the revised and reorientated evolved maturity (away from the reified physical materialist) toward a (structurally coupled and embodied) economy and ecology of Mind. One that is not based on, or organised around materialistic production – but valorises our true wealth and riches spiritually, not materially. We are the embodied environment; there is no dualistic separation [Varela]…without the sustenance of the environment we literally cease to be.

    Perhaps we can look at our (evolutionary redundant) outworn and delusional paradigmatic creations of our old mechanistic and materialistic (Cartesian-Newtonian-dualistic) mindset, and the unreal, unsustainable, and unobtainable fantasies it fostered? From this re-adjustment and re-appraisal we can affirm to do more with less: re-allocating and redistributing our stolen resources? This will not be politically led from the top down. This will be a grassroots revival when we stop believing in the peddled and divorced from reality (Enlightenment project) delusions of future wealth and wellbeing. Without these delusions, we are already closer to being fulfilled in the Here and Now.

    [Have logical empiricism or materialistic rationality (from which comes the instrumental reason that treats Nature as a deployable and disposable means) – have these made us any the wiser, richer, or more fulfilled?]

    Thomas Kuhn pointed out that paradigms do not evolve with mechanistic (shamanistic?) gradualism: they become unsustainable and collapse under the weight of previously ignored anomalous results. As our political economy is producing anomalous results to its expected perpetual growth and marginal prosperity outcomes; and the Enlightenment project is producing diminishing returns in terms of wellbeing and prosperity in the Here and Now (to the unsustainable cost of the planet): perhaps it’s time to move on to a new inclusive and embodied paradigm?

    • Mulga Mumblebrain says

      There is a ready solution to the implosion of neo-liberal capitalism under debt and inequality, and to the ecological Holocaust now making itself so very apparent. Massive depopulation of the ‘useless eaters’ that the global cannibal.predator/parasite caste so hate and fear. With their great interest in depopulation discussed repeatedly at Western elite cabals for decades, I’m surprised that they haven’t unleashed some bio-weapon (surely the preferred means, high tech and thermo-nuclear war being just too destructive of lovely property)yet. They are leaving it awfully late.

    • mog says

      I was a campaigner for Positive Money for some years, which was a variant on a monetary reform idea.
      One reason I am no longer involved is the attachment to ‘growth’ that I encountered within the movement – i.e the making of arguments about economic ‘advantages’ of a more equitable banking/ money system.
      As well as the ecological implications of growth fundamentalism, I now regard further economic growth as destructive to human psychology/ spiritual well being. So many activities that used to be done for free out of some combination of love and commmunity interdependance are now done through the medium of money. Economic activity destroys human community, money has replaced trust between people.

      MMT, Sovereign Money, etc are alluring as ‘silver bullets’ or panaceas, but the problem lies elsewhere in my opinion. Democratising money creation could really help, although how do we make the structures to hold the money power to account when have no trust, no community.

      Revolution and a wiping of the debts would help, but really we need to build communities of trust which have much less reliance on the magickal talismans of exchange that we call ‘money’.

      • Toby says

        That’s my experience too, Mog.

        The two money systems I have seen that are ready for steady-state economics are negative-interest money proposals as detailed by Charles Eisenstein in Sacred Economics, plus a very similar idea from a German outfit called Wissensmanufaktur. They call their proposal “Plan B”, but I don’t know if they’ve had it translated into English. There’s also the “Infomoney” (or “Informationsgeld”) idea from an Austrian professor of accounting called Franz Hoermann. His proposal is radical indeed: dynamic digital ‘money’ creation and destruction during economic exchange between parties as an accountancy record around “asymmetrical prices”. His proposal strips money of its function as store of value, which I find very attractive. His works are in German too, but I translated plenty of it at my blog a few years back (http://thdrussell.blogspot.com/search/label/Professor%20Hoermann). It’s an idea that takes plenty of getting used and is not without its flaws, but is worthy of serious attention in my view.

        In an ideal situation, we would set up experiments with various alternative ideas to see which is the most viable, or which combination of proposal works best, etc. For me, the priority is steady-state-growth economics. Any proposal which cannot operate healthily in steady-state conditions is not worth our consideration. From what I can tell of MMT and its dependency on interest rates, it too would continue the growth madness of the current system. Indeed, MMT is merely a new set of realistic descriptions of how the current money system works, only adding the suggestion that it grants governments more freedom/power than they currently realise they have. It works, in my view, as a temptation towards easy-to-fund perpetual growth and does not sufficiently strip money of its ridiculous power to shape human behaviour.

        • BigB says

          There’s also Shimomuran-Wernerian no-cost “investment credit creation” (ICC): which Labour’s NDB looks like a watered down version of:


          When Steve Keen has the time, he is going to model the trade aspect of MMT in Minsky …to get a more accurate view of what is empirical.

          It’s not how we fund: it’s what we fund. MMT could fund other ways of being: other than having as an ends of a globalised industrialized production cycle …if there is the demand that leads to (spiritual) growth. But so could NCE: if demand was for other than false consciousness wants, needs, and desires that cost the earth.

          There is already too much capital seeking no-risk, high returns – guaranteed by governments willing to socialise the risk. If governments are nominally creating money: then they are complicit in gambling with it? The G7 CBs have colluded to destroy social welfare and productive economies: in order to prioritise and prop up an international asset owning class. Because of it, organisation around the mode and relations of production is economically, socially, morally, and ecologically bankrupt. What we fund has to take into account, as a first principle, that it is a transition away from production and carbon capitalism. Then we can design and fund a post-carbon, post-production, post-capitalist future? With MMT accounting?

          • Toby says

            I think it’s both how and why, indeed, I believe the pair is inseparable in practice.

            If the how includes money-creation procedures that always come with compound interest, that represents a continuous pressure towards growth of economic activity/production. I suppose it’s conceivable that periodic resets and redistributions to unblock an out-of-balance system could be deliberately engineered at need, but I see that as risky and centralising (power corrupts, etc.). You cover all those juicy dangers in your last para.

            Which leads to the other, deeper and more intractable problem: How we relate to money culturally. If we all Just Know that having more is better, even that it’s what the game of life is about, that too is a continual pressure towards economic growth. This needs addressing and would require a long debate about value, a very slippery concept. While it stays unaddressed, the why of funding will be dangerously skewed towards ecocide and social injustice / market fundamentalism.

            So for me, both a different how and why are needed. MMT, from what I’ve seen of it, provides some of the possible ‘new’ How in its unassailable assertion that money is just numbers. But it does not appear to go far enough in my view, and retains too much of the current Why and How of money to produce an approach that encourages and is capable of sustaining steady-state economics. Of course I could be wrong! But that’s how I’ve come to see it.

            The article you link to is very pro growth. Am I missing something?

            • BigB says

              Toby – Re: interest and growth …the way I see it, interest is not such a problem: who the interest accrues to is the problem. If the state is democratic and the sovereign issuer of currency (which I contend it is not); and the CB was nationalised, democratic and transparent (ditto) …say the NDB funded a windfarm with nominal interest; the repayments, even if compounding, are funding and growing a post carbon future? The interest (and amortisation of the principal) are the seed funds of the next tidal lagoon. When we have our (self-funding) future: we owe a debt only to ourselves – there are no third party rentiers involved – so we can cancel the debt so long as it is in our sovereign currency, if we so choose. Money could lead to a future gift economy of symbolic exchange?

              Clearly, there is something quite different happening now. Debts that accrue to private equity amount to economic rent, indirect taxation, and the privatisation of public wealth …accumulation by dispossession. In my naive example, when we want the tidal lagoon: we have to raise more private capital finance. The future has been dispossessed? The government could finance it – at ‘no-cost’ or with deficit funding – but that is not would occur now. Thus I say MMT is theoretical and needs to be implemented.

              Unfortunately, we cannot cancel capitalism overnight: it has to be wound down (degrown) …otherwise people would start dying on day three? We are not food or energy sovereign: we import the bulk of both. Finance is only a sideshow really: the will for a demand-led reclaiming of our future is what really needs to be implemented. Unfortunately, the unconscious massif is good with the materialistic/mechanistic way of things …they want a return to commodified growth and commercialised identity production: their values are skewed toward ecocide …as you rightly point out.

              BTW: you are right about MMT, it is not always MMT enough (and too US-centric [skewed by reserve currency demands]) according to Steve Keen. To which I am inclined to agree. But it is a tool for which we need first the will and the inclination …the toolbox comes from the mind: not the mind from the toolbox!

              • Toby says

                Your take on the positive role interest might play reminds me of Ellen brown’s position, and I confess having been strongly taken with it. Germany’s Landesbanken have, I believe, something like that in their moral constitution and approach to business. There are other examples of that kind. My problem with positive interest is that it feeds into the importance of money as a thing that magically grows forever, that being money-rich is what life’s all about, thus turning it into a beacon for the greedy/sociopathic. (I’m being simplistic for the sake of brevity.) Which is what has happened: control of money has wound up in the hands of the unscrupulous because it is such an excellent tool of control via compound interest. And, perhaps more pernicious than that, compound interest still ‘forces’ (or tends to encourage) perpetual economic growth. Perhaps not by maths per se, but in its power ever decision making. Projects end up being affordable to the degree that they are financially profitable / make more money. Again, I’m happy to be wrong here.

                But there’s also negative interest. There, the annual shrinkage due to negative interest gets re-injected into the economy via, e.g., a guaranteed income. I have my issues with that proposal, but it has some merits. One being that it defangs money somewhat.

                My wish is to have money demoted in the way MMT seems to want to demote it, to tame it. I have a lot of sympathy with MMT’s approach on this point: it’s just numbers guys! And yes, we can ‘just’ print off more at need.

                BUT, as you point out, to what end? And this brings us back to the how-why symbiosis. To want to change the money system, we have to know how, we have to want to write a new story about money, to generate a new relationship with it and with value. But people are so in the dark about what money is, how the system works, there’s so much controversy, so much corruption and power, it’s an almighty struggle.

                You could even argue that the best path forwards is the MMT path, because it is the smallest cultural leap. But judging by the comments here, and the voting, even wanting an intelligent use of the current money system that puts more power into the hands of the people via MMT descriptions of the system’s mechanics, seems a long way off. If a political party had a politician who understood and promoted the MMT position, he would, I fear, be laughed into exile.

        • So many ideas, probably all of which are more sane than what we have now.

          Mary Mellor’s work interested me.

          Positive Money have campaigned for the BoE to prioritise low carbon investment, but that is so naive it is pretty ridiculous. I am with Richard Werner in sharing the fear of a new monetary regime of BoE dgital cash and UBI -as an attempt to centrally manage the decline in the fossil fuel economy through an Orwellian model.
          Then of course there is Quigley’s writing…

          Mellor takes the PM idea and tries to slot it into socialism. Worth a look, even if ‘academic’.

      • The fact that you see MMT and democratising the ‘money supply’ merely demonstrates that you have little to no understanding of MMT.
        Secondly, economic growth does not equate to increased natural resource use or depletion.
        The hardest part in learning real world macroeconomics is in releasing your prior conditioning and opening your mind.
        The ‘left’ of today has adopted many of the right wing shibboleth of the past.

  16. Frankly Speaking says

    “Governments…could create money themselves in order to pay for increased public expenditure without incurring the interest costs that borrowing would incur.
    If governments can create money then it follows that what they spend doesn’t have to be constrained by revenue from taxation”.

    It’s pretty obvious what this would lead to, politicians spending like there’s no tomorrow and rampant inflation and devaluation of the currency. Government having to pay interest rates for borrowing money and paying back through taxation is a brake on recklessness. I’m all for government borrowing more to invest in infrastructure, especially at low interest rates, but removing controls would be disastrous.

    • And yet there is a shortage of government spending leading to endemic under employment and stagnant wage growth in the neoliberal world.
      I think there’s a flaw in your thinking.

  17. Antonyl says

    Is concentrating all power in the hand of bureaucrats a good idea? I have only seen negative sides to that.
    Monolithic power goes bad for the 99%, where you call it Google, Apple or the Ministry.
    Present human nature in action.

    • Mulga Mumblebrain says

      You’d clearly prefer the current system-concentrating all power in the hands of hostile elites, particularly the banksters, I would imagine.

      • Antonyl says

        No, I prefer a setup where any organization that threatens to become too big (or powerful) to fail is automatically split up in two parallel pieces, geographically of otherwise.

  18. rilme says

    Britain and Norway found a money tree beneath the North Sea. They took the gas. Norway invested its share as a money tree for future generations. Britain pirated its share; now it’s gone.


      • BigB says

        Money is energy: with a >99% coefficient of correlation. Rilme is right.

            • No it isn’t. Money is virtual and infinite. Come to terms with that or you’ll never understand macro.

              • BigB says

                Money, in the form of GDP, is biophysically constrained. See Hall and Klitgaard: Energy and the Wealth of Nations.

                  • BigB says

                    True, and true – only that does not mean it is unconstrained. There is a running debate led by ecomodernists that money (GDP) can be decoupled from the environment. So far, there has only been a weak decoupling, probably through the effects of financial engineering (QE, APP, Trumps tax break). But the underlying reality is that money = energy = oil. Just saying it is not will not change the empirical facts.

                    • The empirical fact is that monetary systems are virtual and any tying of them to any resource or commodity is arbitrary.
                      Unless you’d like to lay out some evidence otherwise, I don’t think you’ve thought this through.

                    • BigB says

                      Making such a claim is rash and invalidates your position. I’ve cited Hall and Klitgaard for the general thesis: which is both scientific and empirical. Among other sources would be Dr Tim Morgan’s, or Gail Tverberg’s blogs …but there are countless others. If you are claiming to be an authentic voice for MMT, then MMT needs to go back and take account of such things as biophysical inputs, entropy, waste and heat outputs to sink …otherwise it is just another theoretical and arbitrary econometric devoid of reality: which was my first and main point.

                  • ‘Money is virtual. A man made concept.’

                    It is yes, but there are constraints that give it value or meaning. Hypothetically, in just a matter of seconds any imaginable quantity of money could be created at a laptop keyboard, but of course the amount would have implications for its value or meaning or usefulness. To answer the question ‘Why can’t we just create an infinite amount of money?’ demands a consideration of the real economy, and therefore surplus energy, and therefore energy density of oil and its alternatives (so far none).

                    Just repeating an axiom over and over doesn’t engage with reasoned argument.

                    • Nobody is asking that question but you.

                      MMT is acutely aware of real world constraints. But that doesn’t mean that scores are limited.

                      The Quantity Theory of Money that you are hinting at was debunked in the 1930s. Unfortunately the monetarists and neoliberals overthrew modern economic thinking and brought it back as a big stick to beat the masses with.

                      Thanks for nothing Milton.

                    • BigB says

                      Jag3777: look at the graph I posted – GDP tracks energy (an MTOE) >99%. Or show me your graph of where it does not track?

                  • Toby says

                    That’s true, like number systems generally. But it’s not the whole truth. A simple metaphor suffices to highlight the deficiency of your position:

                    Imagine you have all the money on earth, or even an ‘infinite’ amount of it, all to yourself. But you are with it on the Moon, with no air to breathe, water drink or soil to till, and no means of returning to earth. How wealthy are you? How much value do you ‘own’?

                    All value is rooted in the dynamic health of ecosystems, not in numbers that appear to count how valuable they are. Money, however we define it, is not value itself. It is only an abstraction of value whose efficacy is entirely derived from how it is connected to that value.

                    • Money is virtual and infinite no matter how many red herrings and ifs and buts you put.
                      Recognise the reality then work from there.

                    • Toby says

                      I do recognise that and do work from there to include the rest of physical reality. That’s what I said in my comment. I don’t see the rest of physical reality as a red herring though.

                    • @jag

                      ‘Only when the last tree has been cut down; Only when the last river has been poisoned; Only when the last fish has been caught; Only then will you find that money cannot be eaten.

                      An oldy but a goody.

                      We recognise the reality that money is infinite. You do not recognise the reality that resources and energy are finite. Work from there.

                    • Calgacus says

                      Toby: But it [MMT] does not appear to go far enough in my view, and retains too much of the current Why and How of money to produce an approach that encourages and is capable of sustaining steady-state economics. Of course I could be wrong!

                      Good. Well, nobody can go far enough. But MMT is far ahead of its critics here. MMT is just accounting and counting correctly, in a way that human beans can understand. The critic here just don’t do that. There are some statements here that governments don’t deficit-spend or maybe that they can’t in the current system. Even the mainstream media doesn’t say this! In reality, governments like those of the UK and the US create money when they spend. That’s the way it works now. That is something you understand if you patiently read the arguments, rather than indulging in rhetoric against the Bad People.

                      A saner (though untrue) accusation against MMT is that it is all plagiarism 😉 It was in all the textbooks decades ago – I more or less learnt it during the 70s. Took me a while to realize that, what the MMTers largely did was just clear away a lot of confusing and meaningless bullshit. (If you look at obscure and totally forgotten books and textbooks of the 30s,40s and early 50s as I do – it becomes even harder to say what is new about MMT.)

                      Simply equating money / credit to energy or anything else is a well-trodden path to this bad accounting, this bad logic. (Basically that’s what happened in the collapse of economic thinking in the 60s and 70s) You have to talk about both the “real” and the “nominal” to make sense about real world economics, monetary economics. Discard either one, stop thinking about their relations and how money represents – not “is” – energy and labor and vice versa and you will swiftly spout nonsense.

                      So you like nature? So do I. The critics may say nice things about nature, but if they practiced the kind of logic they are using to criticize MMT, in nature, in ecology, what they would do is cut down a forest and insist that there are a million trees still there, that ordinary people cannot see. And that the evil foreign lumberjack from Mars with his magic ax did all the destruction. But correctly counting – dollars or trees – is important. MMT does it right. The critics don’t.

                    • Toby says


                      Like you seem to be with my position, I’m having a hard time making sense of yours.

                      A saner (though untrue) accusation against MMT is that it is all plagiarism 😉 It was in all the textbooks decades ago – I more or less learnt it during the 70s. Took me a while to realize that, what the MMTers largely did was just clear away a lot of confusing and meaningless bullshit. (If you look at obscure and totally forgotten books and textbooks of the 30s,40s and early 50s as I do – it becomes even harder to say what is new about MMT.)

                      “Untrue”? “It becomes even harder to say what is new about MMT.” Which is it? True or untrue? I’m in your camp – I think – regarding the supposed newness of MMT. I recall in one of my comments putting new in single quotes to emphasise this. I also stated somewhere that MMT is the most accurate description of our money system I know of. But ‘infinite’ money is a red herring. Constraints matter. “Netting to zero” is also a red herring. It’s these sorts of mantras I see coming from the MMT camp that lead to “doesn’t go far enough” statements.

                      As for nominal and real and many other important facets of what money may or may not be, it takes lots of time to flesh these things out. My own position on money is far more involved than I could hope to do justice to in a blog comment. And for those sorts of reasons, I’m not sure I understand yours as a critique of mine:

                      Discard either one, stop thinking about their relations and how money represents – not “is” – energy and labor and vice versa and you will swiftly spout nonsense.

                      For me it’s all about relations, context, situation. And not just money, but all of reality. I suspect I agree with you on most of your points.

                      For me, one of the most instructive things about money is how hard it is to define. It’s not a fixed object, it’s an emergent tool. In my opinion, anyway. I’m fond of Geoffrey Ingham’s works, but it’s been a long time since I read them. One of the major points I learnt from him is money’s role as a tool, a man made thing, a creature of the state. As the state changes, so does money, but its role as tool of control appears to be fairly constant. It’s this political/power aspect that deserves more attention, generally speaking. The accountancy side, the counting, is less interesting.

                    • BigB says

                      No one seems to know what money is: a claim on something; an IOU; a medium of exchange; a means of accounting; a store of wealth? A tool works for me. Define what we want as a teleological goal; then employ ‘money’ as part of the toolkit to facilitate the desired ends? Otherwise we are creating fictitious capital; an M-M’ self-maximising money-go-round; and money for moneys sake …not our own. Money is employing us; not the other way around. Money has to be pegged to a valorisable goal: even if it is an abstract aspirational enhancement of universal global wellbeing or ecological restoration or racial harmony. Then it can be employed fruitfully?

                      Does having a virtual store of ‘money’ make communities wiser, happier, or more closely knit? Separation from the wealth effect of money is destroying communities, making people depressed, insular, or in extremes, addicted and suicidal. Will unity with the wealth effect restore a sense of holism and sanity: or will desire breed desire for the insatiable commodification of life? I think we have lost sight of what the tool is for: it is no longer anchored in our humanity …it has become a utilitarian and instrumental tool to make ever more exotic and unnecessary tools (debt leveraging derivatives).

                      Most of all: I find the dualistic separation of money (a tool) and Nature (the real central bank and store of value) disconcerting, if not actually dangerous. If we do not take our basic method of accounting from Nature, we will precipitate (a greater) ‘metabolic rift’. Human nature and ecological nature are not separate (true anthropocentrism is embodied and enacted biocentrism). Ecology and economy need to go beyond balance: and converge in Self. Then we can design an ecology that valorises true human nature: that is the Arche and Telos of economics. Money and accounting are a means to that end?

  19. We already have an MMT system. MMT describes the system as it is The mainstream economic view is plain wrong.
    A large part of the MMT school’s approach is implementing a government jobs guarantee

  20. Husq says

    unconditional basic income, German, english subtitles,Interview with Götz Werner

    • UBI can’t work economically or socially. A government jobs guarantee is a much more sensible approach.

      • Mulga Mumblebrain says

        Why work at all, as a wage slave, in an era of robotisation, computerisation, automation and artificial intelligence? Simply confiscate all the ill-gotten loot from the parasites, ‘wealth’ stolen from generations of workers, from destroying the natural world, and from genocidal imperial pillage in India, Africa, North America, China etc, and redistribute it to the human beings. Then they can ‘work’ if they wish, or just sit on their arses doing nada, just as the parasitic wealthy can do today. I’d bet that most would find useful, enjoyable, things to do, like gardening, ecological restoration, cultural activities, travel etc, being, at last,’free’ to live as they desire, not as some capitalist blood-sucker or bureaucratic ‘woefare’ sadist demands.

        • Fair dinkum says

          If only Mulga, if only.
          Problem being of course, is that they have the soldiers, weapons, prisons and ‘anti terrorism’ laws to ensure that the BLOOD MONEY remains in their BLOOD COVERED CLAWS.

          • rilme says

            As a schoolboy, I imagined the day when robots would do all the work, everyone would get paid anyway, and we could all go to the beach or climb trees.

            Silly boy! It didn’t occur to me that the richpigs would grab more than their share of the loot. I should have paid more attention in “History”.

          • Mulga Mumblebrain says

            ‘I didn’t say we aren’t gonna get our hair mussed’.

        • Calgacus says

          There are many decisive arguments against a UBI. The good things it can do will be done by a Job Guarantee, which does not have the huge and many flaws of a UBI. One can safely say a true, monetary UBI can never and will never be implemented anywhere. For in monetary terms, these flaws mean a UBI is spectacularly inflationary- it just creates far too much money for any economy to handle.

          Note that there are many billionaires who support a UBI (& none who support a JG as far as I know). That’s because what a UBI would do if attempted. It would make the billionaires relatively and probably absolutely richer, and wreck the economy for everyone else, and probably postpone progressive change for at least a generation. Really isn’t just a little suspicion of billionaires bearing gifts warranted?

          • BigB says

            UBI with a Social Credit Score and/or alienable Rights that come with conformist ‘model citizen’ Responsiblities?

            A McBullshit gig economy Job Guarantee – spit’n’shinin’ shoes for Banksters?

            I think we need a more imaginative re-envisioning of who and what we want to be – post-production: rather than waiting for crumbs to be brushed from the invert-totalitarian Corporatist table?

        • Money isn’t a finite resource that has to be ‘redistributed’ from a fixed, finite pool.
          Tax the rich till their pips squeak I say.
          But that’s a different issue to utilising and distributing resources equitably.
          Governments spend money into existence at will. They tax it out of existence, not to redistribute it.

        • Frankly Speaking says

          I’m all for social justice and a good dollop of wealth redistribution, but allowing people a lifestyle choice to do absolutely nothing, not even community or social work, yet draw an income from the rest of us, is not going to be accepted by society. It’s bunkum. It’s not even socialism nor communism. As bad as Corporatism is, your alternative extreme solution is not the answer.

    • Antonyl says

      If the UK would go for unconditional basic income solo, it would attract even more immigrants than it does now…..
      Everybody knows English, a blessing .. and a curse.

  21. The Gower Initiative for Modern Money Studies says

    An excellent article, Modern Monetary Theory is simply accounting, a lens for viewing economy and the policy afforded by our currency issuing Government. It’s insights cannot he ignored. Progressive political candidates around the world are adopting an MMT position to push for economic and social equality.

  22. Paul Spencer says

    Well done, but you left out a pertinent and powerful argument against such a project – at least as far as many opponents are concerned. This scheme – like socialism – demands socially responsible managers. As in the case of representative democracy, the smaller the crew (such as the US Congress) that is ‘in charge’, the easier and, ultimately, cheaper it is to corrupt the members.

    Although I think that there are plenty of candidates for the MMT managers (or the socialist technocrats) who can remain socially responsible, it will take a socially responsible and involved organization to monitor and maintain their probity. I don’t think that Labor or the US Democratic Party will be capable. Best to get people of good will to get with the becoming-aware youth to put together a new movement?

    Also, I think that it’s easier to monitor and manage when the control agencies are locally-centered and more or less co-equal in responsibility and authority; therefore, they are more numerous and distributed widely. Corollary is that less responsibility and authority remain with the central governments. For instance in the US, we would have state banks such as the one in North Dakota to play much of the role in conjunction with state governments that MMT requires.

    • Paul Carline says

      Decentralisation I.e. distribution of power down to the lowest efficient level, allied with direct democracy – as in Switzerland – would be essential. There could be a residual central ‘government’ (in Switzerland this is 7 individuals from the 3 or 4 pain parties!). Central and local government spending is subject to tight legal limits – and to popular approval in local, regional (cantonal) and national referendums. It seems to work – especially given that Switzerland is a country with few natural resources.

      • Mulga Mumblebrain says

        Switzerland is a parasite on the rest of the world, a situation that Ireland seems to be trying to emulate. Switzerland is just the Cayman Islands writ large-with eidelweiss not heliconias.

  23. rtj1211 says

    The big issue with taxation is avoidance and the refusal to lock up corporate miscreants without trial and remove 100% of their assets.

    Justice systems are paid for by taxation, so avoiders should not benefit from them and should lose their ill gotten gains to boot.

    Billions upon billions are not collected due to a need to be polite.

    Use private sector debt dollection techniques on a few corporate CEOs, CFOs. Amazing how a few crowbars, assaults and the like will make corporations pay their dues in a timely manner.

    • You’ve missed the whole gist of MMT. Taxes don’t pay for anything. They represent the government (as issuer of the currency) removing its own credits from the economy.

      • I am sure rtj is not missing the whole gist of MMT at all. He is simply making a parallel point about taxation as it currently stands, and why the present system is not working as well as it could.

        • No. You’ve clearly missed the gist too. The ‘point’ isn’t parallel. It simply isn’t valid.

          • Jen says

            My impression is that in a society that has adopted MMT, governments spend money into existence by funding infrastructure projects which create employment for people, directly (as in jobs in engineering, actual construction, and administrative tasks such as hiring the engineers, workers and others needed on the projects) and indirectly (as in jobs in businesses that supply building materials, machinery and the training, tools and proper clothing that the workers need, for example).

            The government gets the money back from what people spend on using the goods and services the completed infrastructure projects provide, or from putting their money into bank or other financial products and services which can either be taxed or be provided by the government itself.

            The idea is that consumer spending itself replaces taxation as the means by which the beneficiaries of government spending return the money back to the government so that money is continuously being cycled and recycled (and this presumes that the money supply more or less remains stable). In such a system, you can’t avoid paying back what you owe to the government unless you want to commit slow suicide by starving or exposing yourself to the elements.

            Governments could also get the money back by charging land tax on the land where the infrastructure projects have been established (because by creating or improving the use of the land, the value of the land rises) instead of charging income tax on people’s incomes or sales tax on the products and services they buy.

            RTJ1211’s original comment was not referring to MMT at all but a different issue: corporate tax evasion.

          • Jen says

            My impression is that in a society that has adopted MMT, governments spend money into existence by funding infrastructure projects which create employment for people, directly (as in jobs in engineering, actual construction, and administrative tasks such as hiring the engineers, workers and others needed on the projects) and indirectly (as in jobs in businesses that supply building materials, machinery and the training, tools and proper clothing that the workers need, for example).

            The government gets the money back from what people spend on using the goods and services the completed infrastructure projects provide, or from putting their money into bank or other financial products and services which can either be taxed or be provided by the government itself.

            The idea is that consumer spending itself replaces taxation as the means by which the beneficiaries of government spending return the money back to the government so that money is continuously being cycled and recycled (and this presumes that the money supply more or less remains stable). In such a system, you can’t avoid paying back what you owe to the government unless you want to commit slow suicide by starving or exposing yourself to the elements.

            Governments could also get the money back by charging land tax on the land where the infrastructure projects have been established (because by creating or improving the use of the land, the value of the land rises) instead of charging income tax on people’s incomes or sales tax on the products and services they buy.

            RTJ1211’s original comment was not referring to MMT at all.

              • BigB says

                Not in the current system: the TBTF banks and Shadow Banks create the money supply, ex nihilo. They (plus pension funds and private investors) lend the Government money (in return for issuing IOUs in the form of Treasury Bonds that pay a regular interest or Coupon). When the term (3 months to 30 years) is up: the principal is repaid in full. The Government spends borrowed money: even though it could issue its own sovereign currency.

                • Banks create bank credit. They do not create the currency (reserves) that governments spend, tax and sell bonds for.

                  • BigB says

                    Banks create 97% of the money supply which they loan into existence. The Treasury creates 3% of printed and minted money – but these have been privatised too, I believe. The difference between what the government collects as tax and what it spends it borrows from commercial lenders …as above. The difference is the Budget deficit which adds to the National Debt. That is the travesty: if the government democratically controlled the money supply as you say …the Seigniorage and interest would accrue to us – which it very much does not. The profits are privatised which is an indirect taxation on us.


                    • Jen says

                      BigB, you are talking to an obvious troll who is deliberately confusing the role of private banks in creating money (through loans) with roles of the United States Federal Reserve (which prints paper money) and the United States Mint (which mints coins), perhaps to discredit MMT.

                      Best not to feed the troll if you don’t want to get dragged into the troll’s never-ending orbit of repetition.

                    • Calgacus says

                      No, jag37777 is correct and is not a troll. BigB’s description of the current monetary system is not correct:

                      The Government spends borrowed money: even though it could issue its own sovereign currency.

                      What is called government borrowing is not borrowing in the way the word is used in any other context. The governments of the UK or the US do issue their own sovereign currency right now.

                      As jag37777 says – Governments spend money into existence. Period.

                      What happens is that they then do a lot of completely pointless nonsense that obscures the simple reality. That is the MMT point, there are many papers and books devoted to showing the complete pointlessness of the shell game with government bonds.

                      Governments spend into existence the folding money that you can put into your pocket. They also spend into existence the government bonds, the gilts that also pay interest. Nobody else can create them, not some private bank. Exchanging a bond for a dollar bill or a pound note is NOT borrowing. And it has nothing intrinsically to do with private banks.

                    • Jen says

                      BigB is correct: most money is created by the banking system in the form of loans and other credit. While governments issue sovereign currency and print physical money, most money these days is created through loans to businesses, households and individuals. Loans to businesses may end up as bank deposits for individuals because some of these loans end up as salaries and wages for individuals who then put the money into bank deposit accounts.

                      Once upon a time such loans were in the forms of cheques, certificates or guarantees but these days they are done digitally. Now no physical money (paper or plastic notes or coins) has to be created when banks lend to clients by sticking an agreed-upon number representing the loan to the clients’ bank accounts. At that point the client’s bank has created money.


                      This is possible because most Western countries have fractional-reserve banking systems which allow banks to lend out more than what they hold in deposits.

                      Also governments raise money by issuing bonds but who buys them? Investors – individuals, households, companies, corporations (some of which might be banks) – buy them. Governments are obliged to pay interest (usually at low rates) on bonds – otherwise no-one would buy them. How is exchanging a bond for money not a form of borrowing and why would private banks not have anything to do with bonds (unless somehow they’re prevented from buying them)?

                    • Nope. Banks create bank credit when they make retail loans. They cannot create reserves (government money). The settlement system and all interactions between the banks and government can only be conducted in these reserves.

                    • “interest would accrue to us”

                      The interest on government bonds is income to the private sector. A government bond is just like you moving money from your cheque account to a term savings account.

                      Reserves are deducted from your bank’s account at the central bank and a certificate of deposit is registered in the bonds account.

                      Those reserves had to have come from government spending.

                    • BigB says

                      Jen: thanks!


                      Calgacus, Jag37777: I’m posting Positive Money’s Resources page …please read. The confusion seems to be that neither of you seem to understand that currency amounts to just 3% of broad money aggregate (M3). The other 97% is loaned into existence by commercial banks. End of.

                    • Calgacus says

                      BigBThe confusion seems to be that neither of you seem to understand that currency amounts to just 3% of broad money aggregate (M3). The other 97% is loaned into existence by commercial banks. End of.

                      We understand that. Positive Money is not the same as MMT and where they differ, MMT is correct. Currency/reserves/government bonds = state money are the most valuable sort of money, the base money that underlies the system. The government cannot get its own money from a private bank, as suggested. It is logically impossible. You have to clearly differentiate between bank money and state money and do the accounting carefully to understand things.

                      Most of Jen’s reply is correct. But the last paragraph needs some work.

                      Also governments raise money by issuing bonds…
                      No, that is not how it works. The upshot, once you clear away all the BS, is that governments create money when they spend. The bonds are issued afterward in order to make interest rates positive.

                      How is exchanging a bond for money not a form of borrowing
                      Because the bond is already money and the money is a bond. In Franklin Roosevelt’s words “government credit and government currency are one and the same thing.” A bond is a credit/debt relation between the government (G) and the bondholder (A). So is a dollar bill or a pound note. The debt relation is in both cases G–>A, G owes A.

                      Borrowing from a bank (B) means an individual (A) exchanges his credit to the bank for a credit from the bank. I write a mortgage note (A–>B) and give it to the bank. The bank in return gives me bank money – a debt (B–>A). Completely different; the arrows go different ways, not the same way as with government bonds.

                      “Government borrowing” is much more similar to “making change” – exchanging a ten for two fives. It does not “back” money, it is not necessary at all to do anything, but change interest rates.

                      and why would private banks not have anything to do with bonds
                      I said nothing intrinsically to do with private banks. Of course they could and do hold government bonds. But so can individuals. My ownership of a bond relates me and the government. Nothing to do with some bank.

                    • BigB says

                      Calgacus: essentially you are saying that MMT is right, and the Fed, the BoE, the Bundesbank, and all those learned Professors (Werner, Keen, Hudson, etc) are all wrong when they say that banks loan 97% of money into existence? The banks mentioned do not know how they create money?

                      From the Bundesbank paper:

                      Disregarding currency in circulation, money within the meaning of the monetary aggregate M3 comes into being through transactions between banks and non-

                      Sight deposits are created by transactions between a bank and a non-bank (its customer

                      I follow Steve Keen: as you probably know, he is having a bit of a spat with the MMTers over trade deficits and suchlike: but both he and Bill Mitchell agree on this point and welcomed the BoE admission.


                      So banks create the M3 money aggregate, as the Bundesbank says?

                      When you or jag3777 conflate currency and reserves I get confused: because they are not the same thing at all. Currency is in circulation and reserves remain within the CB. This is why QE did not work: because there is no direct correlation between the amount of reserves and the M3 money supply. Money was not created, the productive economy did not grow (M3 fell), the TBTF went on an asset buying spending spree with $28tn free cash. See Nomi Prins: Collu$ion.

                      There is no mechanistic relationship between the increase in reserves and
                      broad money [M3]. Accordingly, the money supply has not increased in proportion to the manifold increase in reserves; the ratio of M3 to reserves has fallen

                      (From the Bundesbank paper: link on Positive Money page.)

                      One point that runs on from that is that the G7 CBs are not instruments of the government at all: but of the BIS. They colluded to save the asset owning class; not the productive economy. So how can MMT claim to be real world realistic if it does not even know how money is created: and assumes that the CB acts as a nationalised entity?

                      I accept in principal that MMT could be implemented (with Keen’s caveats and provisos), and that governments should deficit spend to create employment: but where you really leave me is that Keen basically thinks that we should sod the environment and leave it to a future engineering project to clean up our mess. This is insanity (from a man I truly respect). If MMT has a use to replace NCE: it must be for a ‘Green New Deal’. If we are talking about a continuation strategy for the cannibalisation of the planet: forget it. When jag says money is virtual and infinite – and has no biophysical correlation at all – I get very worried indeed. Money is energy is oil: continued injudicious use is to the detriment of all.

                    • Jen says

                      Government bonds are still technically IOUs and if they are bought by investors, the money that pays for the bond purchases is created by the banks tasked by governments to organise these purchases. In double-entry accounting systems, the loan (to the government) raises an equivalent bank deposit or set of deposits

                    • Jen says

                      Sorry I hit the Enter button accidentally. I meant to say:

                      Government bonds are technically IOUs and if they are bought by investors, the money that pays for the bond purchases is created by the banks tasked by governments to organise these purchases.

                      In double-entry accounting systems, the loan (to the government) raises an equivalent bank deposit or set of such deposits. But the money raised to purchase government bonds has been created by the bank. The difference in modern monetary systems is that physical currency (in the form of paper, plastic or metal objects or pieces) does not have to be created. Investors get acknowledgement from the debtor government that it owes a debt to them in the form of certificates.

                      So while the government issues sovereign currency, it does not create the money raised by its bond issue. A central bank may have created the money if raising money through bonds is its exclusive task and none other may do it; or if a privately owned bank or set of such of banks have been given the responsibility of selling the bond issue, then they create the money through the loan and the bank deposit. These are required accounting entries.

                      If the central bank is independent of the government in its policy and decision-making, and/or privately owned, then the government is not creating money. If most money circulating in an economy has been borrowed from financial institutions (local and foreign), then the government in charge of that economy has not created the money even if it was the primary borrower of that money.

                  • Calgacus says

                    BigB:essentially you are saying that MMT is right, and the Fed, the BoE, the Bundesbank, and all those learned Professors (Werner, Keen, Hudson, etc) are all wrong when they say that banks loan 97% of money into existence? The banks mentioned do not know how they create money?

                    Quite confusing. I am not saying this at all. I explicitly agreed that “banks loan 97% of money into existence” above! Hudson is an MMTer – he says MMT is right, as do I, so the above has him disagreeing with himself! Often the Fed and the BoE are right about things, but I said nothing about their positions. If one thinks that MMT needs to be implemented, rather than is what is happening right now, or that it disagrees about banks creating (bank) money, then this just shows lack of understanding with explicit MMT theory.

                    When you or jag3777 conflate currency and reserves I get confused.
                    We are NOT doing that. But that appears to be what Jen and maybe you are doing. The word “currency” is unfortunately used for many different meanings – I think you here use it for “M3 money”. MMT is fanatical about not conflating the different kinds of money, tracking the (reserve) accounting correctly.

                    Jen:Government bonds are technically IOUs and if they are bought by investors, the money that pays for the bond purchases is created by the banks tasked by governments to organise these purchases…. But the money raised to purchase government bonds has been created by the bank.

                    No. It cannot work that way. This is a basic misunderstanding, that causes the other errors. It confuses bank money and government money = reserves. The only thing that a government will sell a bond for is government money = reserves. Not bank-created money. Period. If it worked that way, then owning a rinky dinky bank would equate to owning a whole country. It would give every bank the entire financial power of the whole country. It may look to some like a minor error, but it is not. It is as off-base as the idea of the Bank of England (or Poland) issuing US or (Japanese) Treasury Bonds or Euro or Canadian reserves- Huh!!

                    MMT does usually “consolidate” the Treasury and the Central Bank. They are both parts of the same government. But this is not an assumption, but a “theorem” treated in many MMT books and papers. The assertion is that the power of Central Banks is nearly all fictitious, central bank independence is a myth. All that CBs can do is influence interest rates, almost always within rather narrow ranges. Central banks are like recalcitrant children at best. They know they have to do what the grown-ups, the treasury, the legislature, the courts, say. In the USA, there is even law to that effect, that the Secretary of the Treasury can issue orders to the Fed.

                    There is a massive amount of pointless bullshit involved in the Treasury/CB relationship. So it requires a massive amount of bullshit deconstruction to precisely state & prove the “This is all pointless bullshit” Theorem. But the basics are clear. If the CB disobeyed the Treasury, forgot that it was merely “the fiscal agent of the Treasury” then interest rates would explode. Every day would be like the height of the GFC. And the central bankers would quickly lose their jobs. This does not happen: The central bankers and the Treasury officials understand that the CB is subordinate. And although their actions speak louder than words, they often enough have said so.

                    • Big B says

                      Steve Keen also agrees with the basic premise of MMT, and so do I. But it is no wonder there is confusion if you use terms in non-standard usage without defining, or linking to a definition. Currency is notes and coins (3% of broad money); reserves are non-circulatory; held in vaults or at the CB. Banks took QE money, and held it as interest gaining excess reserves. There is no link between reserves and money in circulation (M3 broad money). This is terminology the banks themselves use (see Bundesbank paper). Using theoretical constructs like bank credit, government money = reserves, or high powered money (HPM) becomes an MMT argot. It does not necessarily describe how thing are.

                      Where the MMT position becomes even more theoretical, and not descriptive of the real world, is that post 2008 the G7 CBs acted collectively to save the asset owning class, and destroy productive economies. I cited Nomi Prins: Collu$ion. To say they are instruments and subsidiaries of the Treasury is naive. They are a law unto themselves. Rather than lenders of last resort, they became buyers of first resort …which, if nothing else, skews the whole bond issue. They’ve been on, and are still on (the ECB and BoJ in particular) a $28tn asset buying spree. According to Prins, there is no way back to normalcy (whatever that is) – the rate rise will crash the system. So, expect QE to continue in some form, indefinitely. Where does that leave MMT? Who is the sovereign issuer of the currency now? Not governments.

                      There are other grey areas: such as the “exports=cost, imports=benefit” spat between Keen and Mosler/Mitchell …which is excruciatingly hair splitting. If Germany runs a trade surplus, it is importing currency (Keen’s position). No it isn’t: MMT position. We can argue all day and all night about theoretical details: but the CBs and TBTF/TBTJ banking oligopoly control governments – not the other way around. It is an abstract theory to say otherwise. Ergo: MMT does not describe the way it is, rather, maybe – the way it ought to be? It needs to be implemented: governments do not deficit spend: there is no Job Guarantee. Unless we nationalise the CBs (please don’t say they are) and break up the banking oligopolies, have a national bank or banks with regional development associations and regional banks, etc …then MMT is theoretical, and not realistic …yet.


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