Category Archives: Modern Monetary Theory

The Cycle of Basic Income

We ask all serious graduate students and professors of macroeconomics, government economists, conscientious politicians, poorly educated journalists, and financial-talk-show “pundits” to please read Bernard Lonergan’s Macroeconomic Dynamics, (CWL 15), Section 26, “The Cycle of Basic Income”.  That section addresses several important economic issues:

  • the adjustment of the  rate of saving to the phases of the pure cycle of expansion in the economic process
  • the complementary mechanism of changing prices
  • the significance of a relative and an absolute rise or fall of monetary prices
  • the difficulty with the theory of manipulating interest rates in that a)  it lumps together a number of quite different things, and b) overlooks the order of magnitude of the fundamental problem
  • the ineptitude of the procedure of manipulating interest rates.

Then, after the first reading, please read that section a second time.

Thank you.

[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)

Bloomberg TV and Intelligence Squared’s “That’s Debatable” — “Stop Worrying About National Deficits”

Recently on Bloomberg TV, Intelligence Squared’s That’s Debatable” featured  James K. Galbraith, Stephanie Kelton, Todd Buchholz, and Otmar Issing arguing for and against the proposition of the program’s title, “Stop Worrying About National Deficits”. (Continue reading)

Alberto Bisin Re Modern Monetary Theory

On Saturday, 12/19/ 2020, John Cochrane‘s blog “Bisin on MMT Rhetoric” cited Alberto Bisin’s review of Stephanie Kelton’s Book “The Deficit Myth. “  Alberto Bisin contends, as do we, that So-Called Modern Monetary Theory, as espoused by Kelton and others,  does not qualify as a theory.  Cochrane quotes Bisin:

The book should be seen as a rhetorical exercise. Indeed, it is the core of MMT that appears as merely a rhetorical exercise. As such it is interesting, but not a theory in any meaningful sense I can make of the word. The T in MMT is more like a collection of interrelated statements floating in fluid arguments. Never is its logical structure expressed in a direct, clear way, from head to toe.

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A Tale Of Two Faulty Circulations

PART A – Examples and Comments

Our contention is that a large discretionary injection of “free money” into the channels of Demand – whether by the Fed or the Treasury – rather than as “money justified” through the channels into productive supply, (S’-s’O’) and (S”-s”O”), is intrinsically inflationary.  New money channeled into either the market for secondary financial assets or into the market for basic products, without the money being  “justified” by productive output, is dangerously inflationary. (Continue reading)

Modern Monetary Theory Is Backward; It Creates “Illegal” Superposed Circuits

Preliminary note: In this section we are addressing the proper understanding and management of the economic process in normal, non-pandemic times.  We affirm that the current pandemic calls for extraordinary measures.

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Unwittingly, first out of ignorance and recently as necessitated by a pandemic, some nations, including the U.S., are wandering into the ultimate menace to the financial system, the spending without constraint blessed and recommended by unscientific Modern Monetary Theory. (Click here and here) The systematic result of MMT’s unconstrained printing of money, unjustified by corresponding production of goods and services, is rampant inflation in prices for a) goods and services and/or b) financial assets.  (Continue reading)

Lilley and Rogoff Recommending Negative Interest Rates

We are commenting with respect to Andrew Lilley and Kenneth Rogoff’s “conference draft” discussing the advisability of a FRB policy of negative interest rates:

 Lilley, Andrew and Kenneth Rogoff, April 24, 2019: “The Case for Implementing Effective Negative Interest Rate Policy” (Conference draft for presentation at Strategies For Monetary Policy: A Policy Conference, the Hoover Institution, Stanford University, May 4, 2019, 9:15 am PST) [Lilley and Rogoff, 2019]     (Continue reading)

Modern Monetary Theory Fails to Qualify as Scientific Macroeconomics

Scientific macroeconomics, if it is to be genuinely scientific, must not be contaminated by human psychology.  Gustav Kirchhoff’s laws of the electric circuit do not incorporate the psychology of the human who operates the levers or switches.  So, Lonergan, the scientist, strove to discover the purely relational, purely functional laws of the circuits of the objective economic process.  Unfortunately, many proponents of Modern Monetary Theory exhibit sentiments and inclinations favoring a totalitarian bureaucracy for the management of fiscal and monetary affairs. Their purported science contains some valid assertions, but is not a coherent set of objective laws to which participants must adapt, regardless of sentiment; rather MMT is an admixture of several ideological and psychopolitical sentiments transformed into a contaminated set of mandates for the management of fiscal and monetary affairs.  The tenets of MMT fail to constitute a fully explanatory theory of macroeconomic dynamics. (to continue reading, click here)

Harvard Magazine’s Podcast, “Ask a Harvard Professor”

Harvard Magazine’s podcast, “Ask a Harvard Professor,” recently featured an interview of professors Doug Elmendorf and Karen Dynan – two good people – under the title Doug Elmendorf and Karen Dynan: How Much Can the Federal Budget and the Deficit Continue to Grow? (Click here for video and print versions of the interview)

(Continue reading)

FMD’s Take on Greg Mankiw’s Take on Modern Monetary Theory

Contents:

  • .I. Introductory
  • .II. The “legal” basis of our criticism; the “laws” of the process
  • .III. Key objections to Modern Monetary Theory
  • .IV. Observations re “A Skeptic’s Guide to Modern Monetary Theory”
  • .V. Why and how the Basic Expansion fails to be implemented
  • .VI.  Addendum #1: Primary relativities of the economic process
  • .VII. Addendum #2: Excerpts re the drift to totalitarianism

Continue reading.