r/mmt_economics

We must accept that MMT perfectly explains how money operates today. However, the other day I argued that money decoupled from energy is a trap and does not lead to real growth.

As Warren Mosler rightly defends, a sovereign currency issuer faces no financial constraints, but rather a real resource constraint. The problem is that MMT tends to treat "real resources" and "productive capacity" as political or quantitative labor variables (hence the structural obsession with the Job Guarantee). It analyzes the macroeconomy entirely from the perspective of financial software, completely ignoring biophysical hardware.

Money is a public monopoly, a floating tax credit; but real wealth is exergy (useful energy) transformed through infrastructure.

We can use fiscal space to mobilize every unemployed resource on the planet, but if the net energy return of our energy matrix (ExEROI) is collapsing, as is currently happening with the end of cheap oil and the low energetic density of traditional renewables; the result will not be real growth. It will simply be an acceleration of entropic drain.

Monetary software is infinite, but governed by legal and institutional jurisdictions.

Biophysical hardware is finite, and strictly governed by the laws of thermodynamics.

Attempting to fix a crisis of material or energy scarcity by printing sovereign digits to fund administrative patches only breeds asset inflation, financial bubbles, and a systematic decline in the population's real standard of living. Physics always catches up with finance.

The core conclusion of my debate is that the ultimate goal of sovereign macroeconomic management should not be emitting money to employ humans in the hamster wheel of the market (the Supraeconomy).

True abundance is achieved by utilizing the power of currency issuance to build an automated, hyper-dense Basal Infrastructure (the Infraeconomy) based on nuclear fission. Its physical output (energy by watts, water, data connectivity, and basic shelter) must be delivered directly and demonetized to the population, completely outside the market.

If we free the material baseline of society from the necessity of money, the real resource constraint ceases to be a noose around our necks. Fiat money is a useful tool for managing scarcity in the upper market of human ingenuity, but keeping it at the core of physical survival is a thermodynamic category error.

What do you think? Is it time for MMT to stop looking only at balance sheets and start looking at the laws of thermodynamics?

At the risk of engaging in what some anthropologists call stageism (first there were small groups of hunter-gatherers, then barter, then money, then slavery, then feudalism, then mercantilism, then proto-capitalism, then capitalism, late-stage capitalism, then socialism, then communism or something else, etc...) I'm thinking of deep history, like corvee labor, early "lootable resources," the rise of the state, taxes etc. and how we go to something like MMT.

In the documentary, Finding the Money, there's an interesting section that describes how in medieval times (in Europe? was the same done in Africa, China, among the Incas, I wonder?) that the King would requires taxes that would lead to the creation of an IOU, that became a form of currency. Once this IOU (a wooden stick with carvings on it) was paid pack, it was destroyed, hence the idea of taxation leading to the permanent removal of currency.

Now, in Graeber and Wengrow's The Dawn of Everything, the Davids describe corvee labor, as labor required of residents say of a city to build its walls. They argue that it could be very egalitarian (manual laborers, farmers, royal administrators, and members of the royal family even, etc., all pulling up clay to the wall side by side), though there was evidence of rich elites being to pay something to get out of performing the labor. There there are accounts of taxation of agricultural resources namely grain (Luke Kemp's Goliath's Curse and James Scott's Against the Grain).

So I think my question is, how do we get to a point where we're no longer simply pooling resources not only to enrich an elite, but to engage in public works-- the city wall, or canal-- to something like MMT as shown in the above example of the medieval King in Europe, sticks as IOUs, etc.?

When you get paycheck a portion gets taken away because of the taxes but then the gov uses it for public service like building roads, funding public school and stuff. But I don’t understand if the gov is giving money to us then why is it also taking it away.

Come watch a film and stay for a short discussion about how to reclaim the federal money system from the oligarchs who have used a false scarcity narrative about public money to stall social progress and defund our public institutions in Maine and across the country. Anything this country can actually do, it can afford to do.

Register to attend and learn more: https://events.humanitix.com/finding-the-money-film-screening-and-discussion

The MMT lens ruins everything. I feel like an astronaut staring back at earth asking my heart “why do they fight when life is so short and then wonders of the universe so vast…”

Today’s idle insight:

The fear of inflation tells us to stop printing money (loosely). But what happens when we fix the money but then we keep doing all the activities we do?

Then everything we do/have/create is worth LESS than before on an individual item level. (Total money divided by total stuff equal price per stuff)

Factor in population changes. More people to divide the money (total money/total pop= less money per capita in fixed money)

But if you maintain the stuff/person ratio, then the money makes no difference at all, because MMT tells us the stuff is the object of the entire system. The accounting merely allows us to enumerate and make choices/draw conclusions in a form.

But then there in lies the capital leverage games. Finding ways to skim revenue, shave coins, pinch Pennies. Because if you can save the money and maintain production, certainly there is wiggle room in the lines of negotiations…. Someone can adjust for my greed.

In the MMT USA system the federal government deficit is the mirror of greed, the net savings markets. The money not spent, but used to play market games, to trade abstract potential productivity and negotiate later for goods and services. Where ROI is needed, the federal government delivers the cash on time at an average 2-3% rate. When it has emergencies, it delivers faster, when it forgets what the hell it’s doing, it runs surpluses, crashes the economy with private debts and then manufactures disasters to cover its trails… (ahem, train of thought derailed).

Point being. All the talk of gold and inflation and all this other jazz, it’s all a distraction for a poorly ran MMT system and an economy that won’t deliver a livable life. In a fixed money system, the savings institutions would actually lower your balance of units over time while increasing the purchasing power of your units. So if you saved $10 of gold in 1970, by 2020, you would have $5 of gold but would be able to by 5 times as much. The “numbers don’t lie, I lost money!” People will say it was a bad investment, but the real economy knows that the fixed money in 1970 vs 50 years later, that purchasing power is the thing that matters. Everything in between is a manipulative game of musical chairs.

Society at large should not operate on a musical chairs basis.

In some episodes of the MMT Podcast I’ve gotten fully ensconced in, there’s the idea that a fiat currency is like the points a referee awards to players of a game, in that there’s no shortage of points a referee can assign. They never run out of points.

Would another analogy be that the points reward certain types of behavior? Say the game is little league baseball, in which we reward the team with points for every homerun achieved.  You don’t get points hitting fouls, or for wacking the pitcher.  The game is based on a well defined set of goals that will cause players to behave in a certain way. So this is spending, correct?  The gov says, you get $X for putting solar on your roof.  You don’t get $ for putting outhouses on your roof.  We pay military contractors even more $ for making expensive hardware that blows things up.

And in the sports analogy, UBI would be, everyone gets points (lookin' at you, participation trophies!).  And if everyone gets points, you're not going to have an interesting ball game.

What would inflation be? If the teams need to use the points to buy something. Like, going to the snack shack for a hotdog. The referee says, when you're done with the game, you can redeem the points you earned for hotdogs. And what if the referee decides that you get points if you make a triple too. So now there are really lots of points, where a game might've been say 15-8, now it might be 30-20. And so players instead of using up to 23 points to get hotdogs, now have, in aggregate, 50 points. But shoot, the volunteers didn't make enough hot dogs. And thus prices rise, or some players don't get a chance to get a hot dog. Hm. Not sure about this.

What does unemployment look like? Referee says, sorry, we only have enough points to give out where there are 3 games playing. I know you guys in these other 2 teams want to play, but we can't give out any more points than what 3 games will use up.

Full employment: Hey- you wanna play baseball? Sign up here! And you don't run out of spaces, but no one else signs up.

Green New Deal, ie something the private sector wouldn't invest in of its own accord. Hey, some of you baseball players; want to try lacrosse?

So I'm finishing up Kelton's book, found a number of her talks on Youtube, and am going through The MMT Podcast (Pino and Reilly's).

But one of many questions I have is the following: how did we get here, or how does any nation with a fiat currency get here. E.g., when the banking system in the US was set up (Alexander Hamilton?) and later the Federal Reserve (early 20th c.?), was MMT an accurate description of how US currency works? I was given to understand that once US currency stopped being pegged to a finite resource (like gold in the 1970s), it became a fiat currency. Yet it seems it was acting as a fiat currency way before that, say, during WWII.

And, just as importantly, why is it that politicians, economists, and journalists all seem to subscribe to the household budget analogy if in fact even central bankers will describe the system as MMTesque (there's a clip of Alan Greenspan explaining in Congressional testimony that the US would just pay any debt, or meet any debt obligation issued by Congress, basically implying that Feds would for all intents and purposes print the money needed). Is that how it's taught in college? (I only took micro in graduate school and the rest of my program, Engineering and Public Policy, just talked about modeling, tho' it should treat macro).

I recall ca. 15 years ago NPR's Planet Money podcast describing how large banks get funds from the Federal Reserve, and they described it as just adding zeroes on a computer screen. I think they were explaining QE or stimulus spending? And in their style of story telling it was about how crazy is it with a few keystrokes suddenly there's $10B extra in that bank. They never went any further with the implications of that, or how taxation is the opposite, the risks of inflation, etc. And this wasn't the 2018 story they did on MMT.