This is the second in a short series of diaries recapping certain repeated, and thus oh-so-boring, themes of dispute that have characterized my dialogues with various ideological factions on dKos.
The first installment concerned the fallacy of American Exceptionalism. It attracted a handful of comments doubling down on the boosterism. Whatever. American Exceptionalism remains exactly, and always, Boring, Stupid, and Wrong; it remains, as it must, chauvinist, racist, pollyannaish, and generally wishful. Argument from nostalgia -- for example, "Lookit all the Nobels!" or "yabbut, we wuz the first to give power to the people!"-- is the opposite of rational forecasting. Past performance is not a predictor of future returns. Our university research programs will be outstripped by those in India, in China, and elsewhere. Our political institutions are less progressive than those in various other nations; and they are, as we've seen over the last 7 years of obstruction and demolition, rather less robust than we once imagined. Our traditions of liberty are in ashes. We are an Empire in decline, and, quite the opposite of being exceptional, we look rather like various other empires in their decline -- and not, I should say, empires that declined gracefully.
And that's my last word on that.
So now, it's on to a discussion of MMT, and its oddball cult of initiates. Not to keep anybody in suspense, I'll let you know up front what I think of MMT, and the dogmatic rhetoric of its dKos proponents: Boring, Stupid, Wrong.
I suppose I'm obliged to "explain" MMT. That's a trap, because no matter how I describe its principles, its advocates will respond that I've got it wrong (rather like what happens should one ever make a categorial statement about buddhist philosophy). And indeed, this is my first complaint about MMT: most of its proponents don't seem to be able to articulate its principles in a consistent, coherent set of sentences that a well-educated, well-informed, highly-intelligent individual can make any fucking sense out of. They can't even seem to decide whether MMT stands for "Modern Money Theory" or "Modern Monetary Theory", a distinction that turns out to be more important than anybody outside the cult might think.
They do seem to agree that "Modern" refers to the Money, and not the Theory, which is good, because the Theory -- or at least, the parts of it that are neither stupid nor wrong -- is old hat. The most perplexing thing about MMT is not in its ideas, but in its devotees' excitement at believing they possess knowledge that is:
A. Arcane
B. Subtle
C. Paradigm-shifting
MMT is none of these things. Ultimately, the core of MMT is simply the observation that in a fiat-money system, the government can always create as much money as it wants, and subsequently control the money supply by taxation.
If you just take those two elements and run with them, you've proposed nothing that should surprise anyone with 6 credits' worth of undergraduate economics courses. When I get into arguments with MMTrs, I am usually at some point told that I don't understand economics -- that in fact, I don't know the first thing about economics or money. The only thing I don't understand is why MMTrs think there's something bold, exciting and new in their philosophy.
Ironically, it is the MMTrs who do not seem to understand what money is. They imbue money with an almost magical intrinsic value: We don't have enough circulating in the economy, so make more -- make as much as we want -- and all will be well. Most especially, no matter how much we make, we needn't worry about making too much. Ever.
At times they obsess about the mechanisms of creating money. Should one observe, "We can't just print an infinite supply of money," the initiated will tediously MMTsplain to you that -- again -- you don't understand, nothing is being printed, it's just electronic notations being made in government and banking computer systems.
So, okay, I'm sorry, but this is just stupid. And shallow. And boring. And wrong. It is the single clearest demonstration of the weakness of their own understanding. As any good computer scientist can tell you, a symbolic representation is a symbolic representation. Computers, contrary to popular opinion, do not store information as "1s and 0s". How could they? "1" is either an abstract concept of cardinal number, or a very concrete concept of orthography (i.e., a numeral -- a visual rendering intended to represent the abstract concept). Neither exists inside a computer. Modern digital computers represent information in many ways, always involving switching some physical phenomenon -- a voltage, or a magnetic field, etc. -- between one of two states. The engineers and the programmers choose to think of these things as "ones" and "zeroes", but for the rest of humanity the matter is moot -- what matters is not the mechanism of the representation, but the fact of it.
In other words, it doesn't matter whether the government "creates money" by setting voltages in a static RAM or putting ink on unusual papers or pouring great ponds of cement into which abstract symbols are carved. The money "exists" just as surely regardless of the representation, because money is an abstraction, not a physical object. And the essence of that abstraction is that it has a dual nature: It simultaneously:
A. Represents something "real", namely, indebtedness on the part of society at large to the "holder" of the money,
and
B. Functions as a technology for enabling economic exchange.
If you think those are two ways of saying the same thing, you are wrong. And you may be an MMTr.
The problem with the MMT scheme of simply flooding the economy with as much money as the government "requires" is that it fundamentally undermines Quality A of money. The government cannot create money without creating indebtedness -- an obligation on the part of somebody to return something of value to somebody else. At some point, all of that indebtedness must go somewhere. Regardless of any mumbo-jumbo the MMTrs might mutter, there are only two possibilities in this regard: Either the indebtedness must be abrogated by the government via confiscatory taxation, or the fair value of indebtedness represented by a given denomination of money must decline -- which is to say, there must be inflation.
I've seen MMTrs say some rather extraordinary things with respect to both of these possibilities. Personally, just so y'all understand, I'm okay with confiscatory taxation to stabilize the currency. More to the point, I'm a strong and cheerful advocate of confiscatory taxation to stabilize society. Unfortunately, MMTrs seem to have a What, Me Worry approach to the problem. They do recognize that the government can, and even should, employ taxation to vacuum back up all that surplus indebtedness that would be sloshing around in the economy if we ever did adopt a fiscal program based on their brilliant insight that "Hey, it's OUR MONEY, we can create AS MUCH OF IT AS WE WANT!" They just don't have any sort of proposal for persuading any American congress to implement those taxes. They also don't talk very much about it. One has to really, really push on an MMTr before getting them into the corner where they admit that, well, yeah, the government must be taking with the left hand at approximately the same rate as it spends with the right, with a little slack allowed for economic growth.
Still, one only gets there if one is conversing with a particularly well-informed MMTr. Many of them don't seem to comprehend this point. If they did, they would comprehend how utterly bankrupt is their mantra, "The government can never go broke, because the government creates the money!" Sigh. Look, there's broke, and there's broke. Yes, the government can always create more money, but as I've noted, unless the government is simultaneously destroying money, the value of money will decline. There will be inflation. That is to say, it will cease to possess Quality A, above. This doesn't seem to bother MMTrs. I don't know why. Maybe none of them have ever been owed money, or had any money in the bank.
Actually, the question of government both creating and destroying money is the basis for another of MMt's arcane mysteries. The initiated love to MMtsplain to the dim and deluded that the government does not use your taxes to pay for ... well, for anything, I guess. This particular mystery is Boring, Stupid, and mostly wrong.
It's Wrong because the truth is that the federal government has bank accounts, and when you write a check to the federal government it arranges to have your account debited and the federal government's account credited; and the federal government only cuts checks when there is a balance denoted in its account sufficient to cover the resulting transaction. I don't know why MMTrs think this doesn't happen. It does. It's the same system of accounting that is used to track all currency-based transactions in our society. Again, there's a fascination amongst MMTrs over the use of computer systems to represent money, rather than slips of paper or discs of metal. From a macroeconomic perspective, there is no practical difference. If the government only ever accepted payment in the form of its own banknotes, which it then handed back out again to pay for its operations, the concept would be exactly the same as the digital operations that instead take place. The only difference is that the MMTrs might find it more difficult to believe that Our Taxes Do Not Pay For Govt Spending if the same physical piece of paper went back out as was collected as a tax, rather than each piece of paper being shredded on receipt, and a brand new one issued for expenditure. But then, they might not find it any more difficult at all -- they might insist that it was exactly the fact of the piece of paper being the same piece of paper that rendered all of us benighted non-initiates so blind to the obvious truth. I don't know.
In any case, it's Boring and Stupid because it doesn't fucking matter. What matters is that at any given moment, the federal government has promised, by the issuance of debt, to provide a certain value to somebody; and that if the federal government overpromises, to the extent that the American economy can't make good on that debt, then somebody is going to get burned. If you want a mystery, here's one for you: Why do MMTrs seem to believe that it's okay to simply fuck over the people who have accepted US currency in good faith that those dollars possess Quality A? How can that possibly be construed as moral or ethical?
As for the ballyhooed trillion-dollar platinum coin ... sigh. This is what we get for living in a culture that fantasizes that As Long As The Constitution Doesn't Forbid It, or As Long As It Doesn't Contradict the Constitution, anything fucking goes. The problem with the trillion-dollar platinum coin isn't that it could prove to be inflationary, the problem is that it is a constitutional fiscal time bomb. To be sure, the dynamite was bundled and stacked by the obstructionist Congress -- which refuses to do its Constitutional duty, precisely because nowhere does the Constitution demand that Congress do any of things it is empowered to do. The reason the Constitution does not demand that Congress do any of those things is simple: Who the hell would enforce such a requirement? Generally, this sort of obstruction doesn't happen in other democratic republics (or constitutional monarchies with democratic governance), because the elites who govern understand it as given that some political power is subject to control, not by textual enumerations, but by common fucking sense, common fucking decency, and a common understanding of how government will function. In any other country, a debacle such as we've witnessed since 2008 would have resulted in a "constitutional crisis", which would have been resolved, dammit. In our country, rather than recognizing the situation as a constitutional crisis, we nod numbly, observe that the constitution doesn't force congress to approve a budget or a nominee, and permit our country to careen and career, all over the road and off the road into the ditches and the fields and maybe, if we're not fucking lucky, a bridge abutment.
Wait, where was I? Oh, right. The platinum coin. Right. Whatever. MMTrs are not to blame for the ongoing constitutional crisis, so, hey. Go ahead. Mint it. Then cross your fingers against the day 30 years from now when some nut job demagogue president decides to do something similar, for less noble purposes. Mind you, that's assuming no Congress has managed to reach the veto-proof margins necessary to fix the loophole in the law -- a loophole that only an unethical maniac would exploit, since it quite obviously is not a power any legislator ever intended to give the President.
It's really not a good idea.
So, uh, I guess that's about it. I mean, not really. This isn't all I have to say, it's just all I can bear to say. To burn the MMT bunk-house to the ground would require months of writing by me, and days of reading by you, and we all have better employments. To recap: Mostly, MMT says little that Keynes didn't say, which makes it boring; and the few things MMT says that Keynes did not say are stupid and/or wrong: They are generally confused, and indicate a befuddled concept of the thing that is money. MMT relies on bizarre and imprecise slogans (and slogan-based political science is always boring) that turn out to be true only as useless tautologies ("The government can never go broke!"), which are boring, or self-deceptive prestilingualations ("Your taxes do NOT pay for government spending!"), which are stupid, or misstatements rooted in ignorance ("America has never experienced an inflation caused by deficit spending!"), which are wrong.
Modern Money Theory: Boring. Stupid. Wrong.