Modern Monetary Theory, an exercise in misdirection
Last updated
Last updated
MMT seems to have become popular recently and I can't really see why. Whilst they may state several true things that many people do not realise, they also make many misleading or downright false claims.
MMT proponents claim that they reveal the truth and bring clarity to the topic of money and yet they appear remarkably reluctant to mention "the money supply". Instead they will talks about “Currency” or "Net money supply" or "Net financial assets" or "Black ink". All of these give the impression of being the money supply but absolutely is not.
MMT proponents are keen to state that the government are "the monopoly issuer of the currency". Most people will interpret this as meaning that the government is the sole source of money. This is blatantly untrue and MMT appears in no hurry to correct the listener.
MMT proponents frequently take the term "the government" to mean the government plus central bank combined. This is not necessarily bad in and of itself except that they frequently omit to explain that they are doing so. This omission leads to confusion when they go on to talk about "government spending". Government spending sounds like spending on things like teachers, nurses and police whereas it could actually be referring to the central bank purchasing government bonds, or shares in private companies.
MMT proponents tout themselves as being super expert on the workings of the monetary system and so one might assume that when they give MMT 101 talks to non experts, they would be only too keen to reveal how amazing it was that our monetary system involved money creation and destruction by private banks. And yet they behave as if this was a minor technicality that should scarcely be mentioned.
MMT proponents will often make statements implying that government bonds are simply IOUs to the population at large (and who could possibly complain about being the receiver of the interest payments). However it is important to realize that A) there are plenty of people that will not own any government bonds at all so they may indeed complain and B) government bonds may be held by foreigners.
Proponents of MMT insist that all money must be someone's liability, i.e. money is always an IOU. The problem with this idea is that it precludes the idea of everlasting tokens. Indeed , a leading MMT advocate, . So according to MMT, banknotes must be an IOU. Read . For a more academic discussion of this issue see
Whilst bitcoin may be poor quality money because it is not accepted in many places in return for goods and services, it is by no means "not money" because it certainly accepted in some places.
Whist it is true that on occasions government bonds are used to purchase things, it is not so common. Goods and services are not widely on sale in return for bonds. This makes government bonds poor quality money so to just label them as money is misleading.
As already explained in chapter 1, QE does increase the money supply.