You have got to hand it to\n the proponents of Modern Monetary Theory (MMT). MMT offers a conceptual\n framework of U.S monetary and fiscal operations which accurately \nreflect the workings of these operations in both the U.S. and other \nnations with free floating national currencies. The advantage of the MMT\n conceptual framework is that it can be utilized in a manner which \nserves a broad swath of the American people while it has the potential \nto minimize the class conflict which currently prevails in the United \nStates. If the financial and economic establishment would take some time\n to study MMT rather than presume to know MMT, they might recognize the \npossibilities inherent to the MMT approach.<\/p>\n\n\n\n
In MMT\u2019s recognition that Federal Government spending creates new \nmoney and that taxation and federal borrowing are only necessary to \ncontrol inflation, interest rates, and for other public purposes, MMT \nreleases the federal government of spending restraints while perhaps \nsaving the capitalist class from higher taxes currently deemed necessary\n for increased social spending under obsolete theories of fiscal and \nmonetary policy.<\/p>\n\n\n\n
Under the old theories of fiscal and monetary policy, still prevalent\n in the minds of Washington politicians and the general public, the \nfederal budget is deemed analogous to a household budget: spending is \nconstrained by income; spending beyond income must be matched by \nborrowings. There is, however, a major distinction between the U.S. \nfederal government and an American household. The Federal government has\n the ability to create its own money. With this in mind, how is it \npossible for the federal government to be fiscally restrained? There \nare, however, other restraints on federal spending, most important of \nwhich is inflationary pressure in the goods, services, and asset \nmarkets. Too much federal spending, i.e, money creation, without an \nappropriate level of money destruction, will create inflation in these \nmarkets. Taxation and borrowing are the tools requisite to money \ndestruction in order to prevent inflationary pressures. If one were to \ntravel through the accounting process, one would readily see that the \nMMT explanation of this process is an accurate portrayal of current \nmonetary and fiscal operations in the U.S.\u2019 economy.<\/p>\n\n\n\n
The advantage to the financial elite of MMT thought is that they \ngenerally might be able to have their cake and eat it too. Increased \nsocial investment under MMT need not necessarily be achieved through \nincreased taxation on the upper economic layer of American society. \nIncreased taxes on this group of people would only be deemed necessary \nif increased consumption among working people when combined with the \nconsumption habits of the ruling elites, put a strain on global \nproductive capacity to an extent which causes inflationary pressure. \nThis seems unlikely for two reasons. First, working class people and \nupper economic class people do not generally consume the same types of \nitems. Upper economic class individuals could continue to enjoy items of\n luxurious consumption without inflationary pressure due to a lack of \ncompetition from working class people for these items. Second, to the \nextent competition exist between these two groups for similar goods and \nservices, there is nothing which would limit the expansion of productive\n capacity in order to relieve the inflationary pressure. Accordingly, \nhigher tax rates on the economic elite may not be necessary as a money \ndestruction measure in order to prevent inflationary pressure. Global \nproduction capabilities make the current setting completely unlike \nWeimar Germany or Zimbabwe, the Countries which opponents like to trot \nout as examples of what happens when the federal or national government \ntakes greater control over the money creation process.<\/p>\n\n\n\n
Weimar Germany and Zimbabwe suffered hyperinflation due to severe \nproductive capacity restraints and a corresponding lack of quality \nassets which left both Nations unable to absorb new money creation. This\n is unlike the current setting in which there are virtually no \nrestraints to enhanced global production, setting aside the very \nimportant consideration of the environmental impact of such enhanced \nproduction. This impact, however, could be greatly mitigated with a \nGreen New Deal financed through MMT principles. Due to global production\n potentialities, inflation caused by supply constraints seems extremely \nunlikely.<\/p>\n\n\n\n
There is, perhaps, some credence to the argument that increased \nfederal spending through the Job Guarantee program, a vital aspect of \nMMT, could create inflationary pressure due to an enlarged trade \ndeficit. The Job Guarantee would increase national income, which, if not\n matched by an increase in the production of domestic goods, would \nincrease demand for foreign goods. The increased supply of dollars in \nforeign markets would exert downward pressure on the dollar which is \ngenerally believed, within orthodox theory, to create inflationary \npressure. This, however, would likely be offset as foreign nations and \nthe Eurozone, in an effort to remain competitive in foreign trade, would\n take action to devalue their own currencies in order to maintain \nequilibrium in trade relations.<\/p>\n\n\n\n
Without going into detail, MMT offers other legitimate counter \narguments to the theory that enhanced inflationary pressure would emerge\n due to an enlarged trade deficit. If inflation were to result due to \nincreased money creation due to the Job Guarantee, this indicates that \nthe capitalist model is hopelessly dependent on a pool of unemployed and\n impoverished workers in order to control inflationary pressures. If \nthis is the case, then the whole capitalist framework needs to be tossed\n aside and replaced with a radically new economic order. Who wants to \nlive in a system where the prosperity of some is dependent on the \npoverty of others? They, the ideological proponents of the capitalist \norder, would of course argue that full employment is possible in a \ncapitalist economy outside of the MMT framework; but history does not \nsupport their view: and a few months of close to full employment at the \nend of a business cycle doesn\u2019t support their view either.<\/p>\n\n\n\n
One would think that the Nation\u2019s vested interests would recognize \nthe frailty of their control over the world order and would embrace MMT \nas an economic framework which would improve the conditions of the \nworking classes and consequently secure their lofty positions on top of \nthe hierarchy while simultaneously strengthening the foundations of the \ncapitalist order. Through an understanding and the exercise of MMT \nprescriptions, the ruling elite could save themselves the trouble of \nmanaging an increasingly restless population on both the Left and the \nRight. If they read deeper into MMT, they would discover there is money \nto be made through subscription to MMT thought: the result of increased \npurchasing power among those in the lower economic classes.<\/p>\n\n\n\n
There is no proof beyond \ndoubt that a monetary economy based on market value principles is \ncapable of producing an equitable society. The premise of greed, the \nelevation of material possession over the value of human life and \nwelfare: both foundational to capitalist thought, along with the \nspiritual import of such thought, likely makes capitalism an unworkable \nsolution to just world order. But if it is possible to make capitalism \nwork for all people, MMT seems to represent the best path to get there. \nMMT represents a sharp advancement in monetary thinking. It provides a \npathway towards full employment and within the context of the Green New \nDeal could very well enable sustainable prosperity for all Americans. \nAlthough the proponents of MMT argue their theory does not represent a \nreform of the current system but rather is a correct description of the \ncurrent workings of the Nation\u2019s monetary and fiscal operations, a \nreformation of our thought processes along with some changes in the \nlegal framework under which current monetary and fiscal operations \noperate in this country will be required in order to utilize the \npotential inherent to MMT thought. MMT might represent the last best \nhope for the capitalist order to save itself, from itself<\/p>\n","protected":false},"excerpt":{"rendered":"
You have got to hand it to the proponents of Modern Monetary Theory (MMT). MMT offers a conceptual framework of U.S monetary and fiscal operations which accurately reflect the workings of these operations in both the U.S. and other nations<\/p>\n