Daily Archives: April 16, 2019

A very detailed walkthrough of Modern Monetary Theory, the big new left economic idea.

The Gower Initiative for Modern Money Studies has the Facebook post A very detailed walkthrough of Modern Monetary Theory, the big new left economic idea.

This leads to a Vox article Modern Monetary Theory, explained.

Modern Monetary Theory is having a moment.

The theory, in brief, argues that countries that issue their own currencies can never “run out of money” the way people or businesses can. But what was once an obscure “heterodox” branch of economics has now become a major topic of debate among Democrats and economists with astonishing speed.

This article is an OK explanation, but it does not show a really deep understanding. What disturbs me in particular are the frequent statements that “this is not a problem now” without a word about exactly why it is not a problem now, but what would be the circumstance in which it would be a problem.

Here is one example of what I don’t like.

In the discussion of hyperinflation, there is no real mention of the cause of many past hyperinflations. In most of those cases, if not all of them, there was a sudden drop in the supply of goods relative to an existing supply of money. If the definition of inflation is too much money chasing too few goods, that situation can occur because of a change in the supply of goods as well as a change in the supply of money. People have been conditioned to always think only of the supply of money. The government reaction to the drop in supply and resultant inflation, might have been to print more money, but that was certainly a misbegotten strategy that made matters worse.

There is a reason why William Mitchell, L. Randall Wray, and Martin Watts wrote the book Macroeconomics to explain all this, as the article mentions. Attempts to write a short explanation inevitably lead to their own failures. Do not fall into the trap of thinking that having read a brief introduction equips you to be a consultant on or a teacher of the subject. I am no consultant or teacher, but even I see the failings of the brief explanation.

Which Starving Children Does Our Government Worry About

I make this post to starkly highlight something that has been bothering me about the propaganda we are being fed about starving children. I have not chosen images to be “fair and balanced”.

The USA government is helping Saudi Arabia to fight a war in Yemen. See the next picture from and article in The Irish Times, More than one million children starve as Yemen war rages.

Starving child from Yemen.

This is a war we refuse to stop supporting.

Now let’s move on to a war the USA wants to start to protect the starving children in Venezuela. Here is a Huffington Post article Hundreds Of Children In Venezuela Are Starving To Death, Says New York Times Report.

Starving children in Venezuela

I suppose it is worth pointing out that a lot of whatever starving is going on in Venezuela is caused by the 20 years of economic war that the USA has fought against Venezuela.

If government of the USA refuses to back out of a war that is causing starvation in Yemen, but wants to start a military war in Venezuela because of lesser dire starvation in Venezuela, what is the logic or consistency of our attitude toward the two situations?

Let me make it clear. I am not saying that there is no need for concern about the children in Venezuela. Exactly the opposite. If the USA starts a war in Venezuela, the condition of the children in Venezuela will start looking more like the starving children of Yemen.