Naked Capitalism has the article Jared Bernstein Shows the Costs of Not Understanding Sovereign Currencies.
The Republican and New Democrat deficit strategy is to force Democrats to make an endless series of “Sophie’s choices.” Choose which excellent program to kill in order to save (temporarily) another from the chopping block because we supposedly cannot afford to provide both. Then repeat the process. The Republicans and New Democrats constantly, and falsely, claim that the federal government cannot afford to provide medical care availability that is routinely provided in most of Europe and Canada. It is a pure myth that the United States cannot afford to provide the safety net of Social Security, Medicare, and Medicaid.
I certainly believe the MMT (Modern Money Theory) explanation of how the monetary system works, but I have come to realize that there are a couple of important factors that MMT proponents ignore. My issues do not invalidate the gist of the above article, but I feel it necessary to get the MMT experts to address my issues. Doing so can only increase the credibility of MMT.
One factor is the belief that the money created in the private sector by lending is somehow always a less important economic force than money created by the sovereign power. The accounting balance of assets and liabilities (money lent and obligation to repay) is a static balancing. The economy is dynamic, however. Money lent can be spent immediately. The obligation to repay is in the future. In the time span between when the money is lent and when it must be repaid, there is a lot of economic activity going on. The effects of this cannot be ignored.
The other factor is mark-to-market valuation of assets. I’ll defer discussion of that to a later comment.
There is plenty of evidence in economic history, both recent and not so recent, to demonstrate the importance of the two factors mentioned above.
I would love to see a discussion of both factors by the MMT theorists.
Keynesian explanations of why monetary policy is not the only factor driving the economy still apply after all these years. After all, these too are just explanations of how things work whether you choose to act on that knowledge or not.