… , positive or negative transfers (from the Redistributive Function) to basic demand (D’-s’I’) and consequent similar transfers (from the Redistributive Function) to surplus demand (D”-s”I”) belong to the theory of booms and slumps. (CWL 15, 64)
The channels of circulation replace the overall dominance claimed for general equilibrium theory, … More positively, the channels account for booms and slumps, for inflation and deflation, (CWL15, 17)
The concomitance of outlay and expenditure follows from the interaction of supply and demand. The concomitance of income with outlay and expenditure is identical with the adjustment of the rate of saving to the requirements of the productive process. [CWL 15, 144]
Once the possibility of an unbalanced budget is established, the precedent can be invoked to persuade politicians to carry on other wars: wars on illiteracy, on poverty, on ill health, on unemployment, on insecurity. Where the profit motive does not prove efficacious, the state must intervene. … the increasing volume of transactions requires a larger money supply, and the central bank can be persuaded to meet the demand. … it appears to be less evident that a vicious circle of ever more demands for a larger money supply with no increase in real income is inflationary … [CWL 15, 85-86]
Ideally, dummy money would be constant in exchange value.
Money is an instrument invented by man to make possible a large and intricate exchange process. … variations in the volume, if not to result in inflation or deflation, postulate some variations in the quantity. Now in the long run these variations in quantity can be had only by the introduction of a money of account, [CWL 21, 104]
… the dummy must be constant in exchange value, so that equal quantities continue to exchange, in the general case, for equal quantities of goods and services. The alternative to constant value in the dummy is the alternative of inflation and deflation. Of these famous twins, inflation swindles those with cash to enrich those with property or debts, while deflation swindles those with property or debts to enrich those with cash; in addition to the swindle each of these twins has his own way of torturing the dynamic flows; deflation gives producers a steady stream of losses; inflation yields a steady stream of gains to give production a drug-like stimulus. [CWL 21, 37-38]
The present inquiry is concerned with relations between the productive process and the monetary circulation. It will be shown 1) that the acceleration of the process postulates modifications in the circulation, 2) that there exist ‘systematic,’ as opposed to, windfall profits, 3) that systematic profits increase in the earlier stages of long-term accelerations but revert to zero in later stages – a phenomenon underlying the variations in marginal efficiency of capital of Keynesian General Theory, 4) that the increase and decrease of systematic profits necessitate corresponding changes in subordinate rates of spending – a correlation underlying the significance of the Keynesian propensity to consume, 5) that either or both a favorable balance of trade and domestic deficit spending create another type of systematic profits, 6) that while they last they mitigate the necessity of complete adjustment of the propensity to consume to the accelerations of the process, 7) that they cannot last indefinitely, 8) that the longer they last, the greater the intractability of ultimate problems. From the premises and conclusions of this analysis it will the be argued 9) that prices can not be regarded (by the stewards of the economy) as ultimate norms guiding strategic economic decisions, 10) that the function of prices is merely to provide a mechanism for overcoming the divergence of strategically indifferent decisions or preferences, and 11) that, since not all decisions and preferences possess this indifference, the exchange economy is confronted with the dilemma either of eliminating itself by suppressing the freedom of exchange or of certain classes of exchanges, or else of effectively augmenting the enlightenment of the enlightened self-interest that guides exchanges. [CWL 15, 5-6]
Modern Monetary Theory has always been a disaster waiting to happen. In its unchecked extreme of printing money unconstrained by relation to the real flow of goods, and services, it would bring about rampant inflation, menace the financial system, and, ultimately, bring about a) the destruction of the financial system, and b) social chaos. The longer irresponsible borrowing by government and unconstrained printing of money by the Central Bank last, the greater the intractability of ultimate problems. MMT is quackery posing as theory.
Consult the indicated pages in CWL 15 and CWL 21 for context and explanations.
[CWL 15] Lonergan, Bernard (1999), Macroeconomic Dynamics: An Essay in Circulation Analysis, ed. Frederick G. Lawrence, Patrick H. Byrne, and Charles Hefling, Jr., vol 15 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press) [CWL 15]