Economic Update: Government Deficits; Why They Happen, Who Benefits From Them, and MMT
Richard Wolff mentions the printing of money occasionally, but he never squares that with the government supposedly needing to tax and/or borrow first before it can spend.
He spends the last two minutes talking about MMT, but not as a theory of fiat money; instead as a novel monetary policy proposed by “progressive-minded economists.”
Somewhere in there he also repeats the common fallacy that what banks lend is other people’s savings. They don’t. The money they lend is created out of thin air, and the “money multiplier” is a myth.
I’m just a technerd who’s never taken an economics course, and I grind my teeth every time this expert botches these fundamentals. Why Michael Hudson and Radhika Desai never push back on him when they do talks together is a mystery to me.
Convergence of factors that empowers the bourgoisie? I mean the state could use an MMT paradigm of money but does not, which begs the questions why not? Where some proponents of MMT consider the likes of taxation or other forms of account deposits as “deletion” of money from an MMT circuit but the bourgoisie do not, so why do they not? Who is MMT useful for then? Those who do not want supercede capitalism but spread the loot of imperialism more equitably?
The problem with MMT it attempts to isolate itself from its own externalities and in doing so loses its usefulness.
The reason I asked about imperialism because if countries in the peripheries attempted to frame its fiscal policies based on how MMT describes circuit of money then they risk capital flight and hyeprinflation if they do not have a dictatorship against capital. It is therefore an imperial core centric paradigm of monetary theory. We haven’t even gone into how US imperialism reduces the inflationary pressure agsinst the dollar.
The central problem with MMT is that it sidesteps theory of value. All value is labour and MMT cannot address this. All capital including money represents labour. The MMT circuit is inadequate in addressing this.
Any supposed usefulness that MMT provides for praxis requires a dictatorship against capital at which point it then appears to lose its usefulness.
(Genuinely thanks for replying nonetheless!)
I’ll just stop using the term MMT altogether, because every time almost everyone thinks I mean all sorts of things by it that I don’t. The fundamental theory within it, which is a small & modest (and correct), gets buried under expansionist liberal ideas every time I bring it up.
In places like lemmygrad it will always be questioned what it brings that marxism does not. If you can use it to bring liberals to the fold then more power to you but in my experience people get stuck by its limitations (ie then need to read Capital).
Does Capital explain fiat money? AFAIK it explains the commodity-backed money used in 19th century Europe. Is reading Capital going to change the fact that the state creates fiat money “by fiat,” that its value is largely derived from our need to pay taxes in that same currency, and that paying those taxes essentially disappears that money, just as paying down the principal of a bank loan does? Are these basic facts not relevant to Marxism today?
Can fiat money not be capital?
The idea behind MMT is that you can pay privatised government debt by printing it without raising taxes, right? Let’s do that. The government is now not in debt. What happens to the coffers of those privatised institutions? They have grown and you have not really changed the overall relationship between the bourgoisie and the proleteriat, unless it has been decided that money can now buy less labour (but marxists have a more sophisticated understanding of inflation beyond supply and demand curves, so we do not need MMT for this). Fiat money as we understand it now is after Marx’s time but the tools to analyse capital still useful. The government’s ability to print money and use it as it sees fit; do we really need MMT to explain this phenomenon?
That’s not quite how it works. The privatised government debt is in the form of treasury bills, notes and bonds that mature at different time periods: bills being short periods (weeks). Notes being up to ~10 years. Bonds being 20 or 30 years. The government pays interest on those bills, notes and bonds. So a portion of the yearly Federal budget is money to those investors.
The government has to pay those bond holders for decades. Treasury did buy back some bonds last June but it wasn’t really a large enough amount to effect the debt.
I understand that, it was just an abstracted simplifed example to acknowledge that MMT highlights that you don’t need to raise taxes for the government to “pay” for stuff.
Ah I see.
Yes under MMT, taxes don’t pay for government spending.
I think MMT is a great way to argue that government shouldn’t justify austerity measures because of public debt.
Unfortunately the privatization of that debt under an international capitalist treasury bond market system has fucked that up to a great extent.
I don’t think anyone is suggesting it isn’t. It’s no more or less capital than commodity-backed money is. They’re both money.
The idea is that neither debt nor taxes are needed for the state to pay for stuff domestically, because it can (and does) create money. The state may have other reasons for debts & taxes, but paying for domestic goods & services ain’t one of them. This wasn’t the case before 1971, never mind 19th century Europe (though it was the case in other places and times).
They’d get invested elsewhere, because the state stopped offering risk-free, interest-bearing debts that do nothing for the real economy, because they remove capital from circulation, from wages and capital investment.
The Chinese state seldom offers “free money” debt instruments, so the Chinese bourgeoisie can’t park their capital in them, and Chinese capital controls keep them from parking it in other states’ debt offerings.
Neither Hudson, Desai, nor I would suggest that it would change that relationship.
Call it MMT or call it late for dinner. Whatever you want to call it:
And that basically covers the first three bullet points of Wikipedia’s explanation of MMT. I’m sure the article devolves into liberal nonsense later on, but I’m not talking about any of that.
My dispute is not whether MMT exists but whether marxism supercedes it; I mean you made an excellent example of a socialist country using fiscal policy that subverts neoliberal economies supposed paradigms.
In other words MMT without the liberal fluff as you put is already encapsulated in Marxism.
I would like to be able to say that Marxism encapsulates MMT without the liberal fluff, but unfortunately it depends on which Marxist you talk to.
And that’s why I bring up MMT in the first place: to introduce the aspects of MMT that I think are encapsulated by Marxism, or at least ought to be.
I think Capital III is where Marx gets into what money actually is, and I think he gets as far as distinguishing between the commodity value of the metal in a silver coin and value of the coin-as-money. So perhaps he gets close to explaining that ultimately, all money is fiat money, but not having read it yet, I can’t say.
Money is still a commodity and its value is still an expression of labour time even considering MMT. That is the problem of MMT and distinctions of fiat currency. The form that money takes is simply obscuring its actual function which is managing the flow of abstract labour time and its exchange.
No commodity can be willed into existence, while all fiat money is, so money is not just one more commodity among many. It’s the neoclassical economists who think so. They also don’t understand that money is debt (which, to be fair, is something I had to chew on for a long time to digest).
Radhika Desai & Michael Hudson, 2023: https://michael-hudson.com/2023/02/since-money-is-political/
I’m not reading Hudson if you’ve not read Marx tbh.
Vol. I, Chap. 1, Sec. 3: Money or the circulation of commodities
Even when using gold as the “money-commodity,” Marx distinguishes it from all other commodities, and he distinguishes money from the gold commodity that’s physically in coinage. Fiat money has dispensed with even the gold, both as gold in the coinage itself and as a promise to exchange it for a specific quantity of gold, which Nixon ended in 1971.
It would be worth reading that section carefully and studying it with regards the actual functions of money as the universal commodity, and reading the section on Inconvertible Money (paper money with no physical gold backing, fiat). Money fulfils the role of allowing non-money commodities to come face to face with one another as exchange values, fulfilling the C-M-C circuit of commodities. Fiat or not, that’s its function behind the mystique, paper or gold.
For consideration as well is economist Michael Roberts on MMT: https://redsails.org/the-modern-monetary-trick/ who goes into much greater detail than I have on these points.