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.
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.
Yes, and that is why money is not just one more commodity among many as neoclassical economists claim. It’s not a commodity so much as the medium of exchange for commodities, including labor-power. Occasionally it is used as a commodity, like in currency arbitrage. But again the state, which has a monopoly on the creation of money, can and does create as much as it wants at will, fiat money especially, which happens instantly and requires no labor beyond typing numbers into a spreadsheet. No other commodity is like that.
What Michael Roberts is doing is pointing out liberals’ misunderstandings and overreach of fiat money’s implications, which I do as well, as do Hudson & Desai. Liberals often think it’s some magic spell that can fix capitalism, due primarily to not understanding class relations much at all, I think.
Edit to add: Actually labor is special as well. Commodities are the things the we make to sell, and labor isn’t that. Most labor is the work that goes into producing commodities.