Angry Bear has the article MMT II.
I don’t know much about MMT, but I am going to write about it anyway.
There doesn’t seem to be a way make comments on that blog, so I wrote an email to the author Robert Waldmann.
Whether pure monetary policy is important depends on the circumstances and depends on who gets the money. If you pump money into an economy and give it all to the people you expect to invest it, and there are no investment opportunities because of low consumer demand, do you think it is reasonable to expect investors to use the money to build more production capacity when production capacity is already in excess of demand?
Either these investors give the money right back to the government by buying treasury securities, or they pump up asset prices including the stock market.
When there is full employment, but a lot of that employment is in the FIRE sector which detracts from the productive economy, couldn’t we have a better economy if that money got redirected into useful work? When people are fully employed in jobs that don’t pay a livable wage, is that a good economy?
Surely you know about all these subtleties, but somehow they do not make it into your article.
/Steve
Robert Waldman’s reply was
I don’t know much about MMT and you don’t know what “monetary policy” means. You are discussing fiscal policy. Monetary policy does not consist of giving money to people. It can consist of open market operations — the Fed buying treasury securities. It can consist of reserve requirements, and it can consist of changing the interest rate the Fed charges on loans (the discount rate) or that it pays on deponsits.
None has anything in particular to do with giving money to people. Giving people money is called fiscal policy.
It is not easy to have a useful discussion if people use technical terms with their own definitions. Just for fruitfiul communication, it is best to use the official definitions of official terms.
It is also not ideal to begin an unsolicited e-mail with a criticism bordering on an insult.
/Robert
To which, I replied
So QE was fiscal policy? Is that what you are saying?
/Steve
The final email in this series was his final reply.
QE consisted of purchases of treasuries not gift of anything to anyone. It was an open market operation and did not correspond to what you called monetary policy.
Do not e-mail me again.
I might just add that the purchase in QE (Quantitative Easing) by the Federal Reserve Bank of worthless private bank “assets” at full face value was certainly a gift to somebody. QE was not about the Fed buying Treasury securities in the open market as was the usual Fed activity before QE. I had no inkling of how little Waldmann really knew.
At the time QE was first practiced, I did read commentary that this was as close to fiscal policy as the Fed could come because they did not have legal authority to exercise fiscal policy. It was touted as close to fiscal policy, I suppose, because the federal government (The Fed) bought something from the private sector. I never thought that buying something worthless at full face value was anything like the fiscal policy of buying something from the private sector that both provided a service to the people and also put people to work. Maybe, I don’t understand neo-liberal economics.
