Modern Monetary Theory (MMT) continues to make inroads into the mainstream discourse with the appearance of an article by Youssef El-Gingihy in The Independent Online. The article features MMT in connection with the new book by Bill Mitchell and Thomas Fazi, Reclaiming the State. At its recent rate of dissemination, MMT may transition from heterodox to mainstream ahead of expectations.
Welcome to the very first (and possibly last) “Don’t Understand, Don’t Even Want To F___ing Understand Modern Money” post, otherwise known as a DUDE WTF UMM… post. This is for those of us who have no desire to consider economics at even an elementary level but who are tired of others exploiting our indifference and blasé attitude for their own dubious ends. Just because we don’t know diddly-squat about economics and are proud of it, this should not disadvantage us in life. What we need are some easy ways to spot when we are being led astray, without too many boring details.
When Marx’s theory of value is interpreted in a simultaneist way, it is relatively easy to calculate the ‘monetary expression of labor time’ (or MELT). It is simply new value added, measured in monetary terms, divided by productive employment. If it were not for the ‘productive’/’unproductive’ distinction, the simultaneist MELT could readily be calculated from the National Accounts as the ratio of Net Domestic Product at current prices to Total Employment. Retaining the productive/unproductive dichotomy complicates matters somewhat, because it is then necessary to exclude unproductive activity from the calculations, but no other hurdles appear to be present.
One suggestion in the comments to the ongoing “short & simple” series is to cover the balance of payments. This will be covered at some point in the introductory series, but I am still considering how best to present it in brief, simple form. With that in mind, it seemed worth attempting a regular post on the topic. The post is still intended to be elementary in nature, but is perhaps at about the introductory university level. The post is also too long to qualify as “short”, even allowing for the fact that some recent parts of the series have already stretched the definition of “short” beyond what I would have preferred.
The video below is of a three-part presentation by Bill Mitchell, L. Randall Wray and Martin Watts concerning their forthcoming MMT textbook. Throughout the presentation and in the Q&A session that follows there are interesting observations on the current state of university economics and prospects for MMT and the economics discipline in general. The presentation was given at the First International Conference on Modern Monetary Theory held from September 21-24, 2017 at the University of Missouri-Kansas City (UMKC).
This is a presentation by Professor Bill Mitchell at the University of Victoria, Wellington, New Zealand on July 28, 2017. It addresses framing of the macroeconomic policy debate and touches on the most fundamental insights of Modern Monetary Theory. Most here will be avid readers of the professor’s blog, but this talk is too good not to post. While in New Zealand, Professor Mitchell also did an interview for the public broadcaster. A link can be found in the billy blog post of July 31, 2017.
From inception of a monetary economy with a government-issued currency, it is clear that government spending must come before tax payments or purchases of government debt. The order of requirements is basically: (i) government defines its monetary unit of account; (ii) government imposes taxes and other obligations that can only finally be settled in that currency; (iii) government spends (or lends) its currency into existence; (iv) non-government can now obtain the currency and, among other things, pay its taxes and purchase government debt. It is clear that government spending must logically come before tax payments or purchases of government debt because non-government must be able to get hold of the currency before it can do these things
This is an excellent introductory video, scripted and narrated by Geoff Coventry. It is mentioned in the YouTube comments that Stephanie Kelton and others advised on the work. No doubt the video has already appeared on other blogs. The link was provided by acorn in the comments.
Marx’s ‘law of the tendential fall in the rate of profit’ holds that there is a tendency, during a phase of capitalist accumulation, for the ‘organic composition of capital’ (constant capital c divided by variable capital v) to rise. Other factors remaining equal, this puts downward pressure on the rate of profit r:
where s is surplus value and s/v is the ‘rate of surplus value’. If the organic composition of capital (c/v) rises, then r will fall unless the rate of surplus value (s/v) is increased sufficiently to offset the effect.
There is a lot of misinformation spread by politicians and much of the media on the topic of fiscal policy, particularly when it comes to the role and impact of government deficits. When the level of economic activity collapsed in the wake of the global financial crisis, government fiscal balances around the world moved toward, or into, deficit. To a degree, in some countries at least, this occurred as a result of appropriate policy responses to the depressed economic environment. To a larger degree, it was due to the automatic effect of declining income on tax revenues through what economists refer to as the automatic stabilizers. These are fortunately in place to cushion households and businesses from the worst effects of a downturn. Currency-issuing governments, facing no revenue constraint, always have the capacity to run deficits as required.