Naked Capitalism has the article Matt Stoller: Greta Krippner’s “Capitalizing on Crisis” Describes Real Origins of Financial Deregulation.  Here are some excerpts from what Stoller wrote.

According to Krippner, deregulation wasn’t a nefarious set of choices by Reagan and his Republican banking cronies, it was a response by a policymakers (a Democratic Congress and Democratic President) to the failures of the liberal state. After it was put in place, Reagan of course was a key player in setting its direction. Along with Paul Volcker and Alan Greenspan, Reagan took financialization in unexpected directions, but the basic contours were clear before Reagan came to power.
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Sociologists at their best are detail-oriented scholars of technocracy, people who can play in the sandbox that economists set up but explicitly choose to recognize modern economics as the giant power-ignorant witch-doctor con that it is. Krippner is polite about this, but she’s also clear that politics and not efficiency was the motivating factor behind the rise of finance in America (and the global) political architecture since the 1970s. But for all her superb work, which includes reading every single public meeting of the Federal Open Market Committee and it seems like every single hearing in Congress in the 1960s and 1970s, I found myself unconvinced on two fronts.

One, as Jeff Madrick noted in The Age of Greed, the era of financial deregulation started with National City’s development of the CD in the 1950s, and the Eurodollar market at roughly the same time. The regulators allowed these ‘innovations’, but they didn’t have to let these first cracks in the dam to remain un-repaired. Similarly, one could note the same thing about the explosion of bank cards in the 1960s, which the bank regulators ardently defended throughout the era. It’s obvious they wanted a national credit market, and they wanted their banks to control it.

And two, Krippner argues that the shift to finance as dominant was an inadvertent response by policymakers to a difficult set of circumstances. Surely, pushing inflation into the financial architecture of the 1960s and 1970s caused massive problems, and created the preconditions for inevitable reform. But she doesn’t prove that financialization was inadvertent.

The whole article is enough to make my head spin.  He and the book raise some history that makes me a tad queasy about my new learning about MMT.  Then at the end of the article he seems to reverse himself a bit.

It is not that I have much doubt about the history that was cited.  It does not disagree with how I remember it given my limited ability to know all that was going on at the time.

I haven’t deeply digested the article yet, but I think it may be valuable as something to take in and let your subconscious work on it for a while.  At least that is my style for learning.

2014-02-18 later

Well, my subconscious got to work and it resolved my issues with this article and MMT. Part of MMT separates the accounting of financial instruments, money things, from accounting for real assets. What you can afford in terms of money things is often not well correlated to what you can afford in real assets. What MMT says is that a country that is sovereign in its own currency can always afford anything in terms of its own money things. Depending on the usage or idleness of real assets, resources, workers, and factories, determines whether or not the economy can afford to do more than it is currently doing in the real asset accounting world.

During the latter half of the Johnson years (late 60s) and up to the advent of Ronald Reagan, there was no spare capacity in real assets. So, because President Johnson wanted to fight a huge war that tied up lots of real assets, also wanted to fight a war on poverty, and wanted to keep the civilian population from bearing any extra burden, he did not want to raise taxes.

In MMT terms, or any terms, there were plenty of money things to call forth for the greater use of real assets, but there weren’t any idle real assets to be deployed in response to the call of the money things. That is what led us into an inflation that lasted almost 15 years. Johnson could have raised taxes from the beginning to prevent the money things from outstripping the available real assets and thus have kept inflation in check. Ronald Reagan took a different approach. He put us into the steepest recession up till that time since the great depression. This made money things disappear in a flash and made many real assets go idle. Simple solution except for the real pain it caused for many people.