Economic Update: Government Deficits; Why They Happen, Who Benefits From Them, and MMT
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[EU S15 E34] Government Deficits; Why They Happen, Who Benefits From Them, and MMTEconomic Update returns next week to its regular schedule! This week's epis...

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.

  • davel@lemmygrad.mlOPEnglish
    2·
    20 days ago

    Can fiat money not be capital?

    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 behind MMT is that you can pay privatised government debt by printing it without raising taxes, right?

    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).

    What happens to the coffers of those privatised institutions?

    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.

    They have grown and you have not really changed the overall relationship between the bourgoisie and the proleteriat

    Neither Hudson, Desai, nor I would suggest that it would change that relationship.

    The government’s ability to print money and use it as it sees fit; do we really need MMT to explain this phenomenon?

    Call it MMT or call it late for dinner. Whatever you want to call it:

    • The state can (and does) create fiat money to pay for stuff,
    • which self-evidently means that the state need not borrow or tax to pay for stuff.
    • And it means that domestically, we value this money because state taxes must be paid in it.
    • And it means that state taxes are the destruction of money just as state spending is the creation of it.
    • And it means what Alan Greenspan said fourteen years ago: “The United States can pay any debt it has because we can always print money to do that.” Massive hyperinflation only happens when a state has massive debt denominated in some other states’ currencies.

     
    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.

    • darkernations@lemmygrad.ml
      3·
      20 days ago

      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.

      • davel@lemmygrad.mlOPEnglish
        4·
        20 days ago

        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.