Tag Archives: John Quiggin

Modern Money: A New Hope

Originally published at the Australian Independent Media Network

Modern Monetary Theory (MMT) is not a trap but it is radical.

It shows us how to construct democracy in favour of the people and foster a better political discourse and shows that the policy space available is wider than usually assumed. This piece is a direct response to John Quiggin’s

and in its place Leia Organa’s distress message to Obi-Wan Kenobi that MMT is a new hope, writes Darren Quinn


Continue reading Modern Money: A New Hope

Politics: Debt and Taxes

In my recent piece at the Australian Independent Media Network, there was a section I was not able to put succinctly and thus left it out altogether.  Joe Weisenthal from Bloomberg publishing as @TheStalwart on Twitter has managed to do what I was unable to do.

Photo by Mike Coppola/Getty Images. Originally from  the NY Post

Joe Weisenthal writes:

When people think “x pays for y” what they think about is sales at a company (cash coming in) paying for employee wages (cash going out)

People love pointing out the math how if we taxed the rich more we could solve homelessness or some other societal ill. MMT points out we do not need higher taxes on the rich to get more homes. What we need is for Congress to allocate the money to spend on more homes, and we need the supply-side capacity to build those homes.

Ameliorating inequality by taxing the rich might be a social good, but strictly speaking, the government can do plenty more than it does even without a wealth tax or a change to the highest marginal rate on income.

If you point this out though – taxes don’t directly fund spending – you get accused of word games. The logic is that taxes diminish domestic demand for goods and services. This creates idle goods and services. Then when the government spends money, that money can be used to employ those idle goods and services. Ergo taxes *do* fund spending, in a kind of roundabout way.

Cash-in, cash-out is clearly not what’s described above

Joe Weisenthal did write all the above for Bloomberg but I have somewhat re-ordered it. I do not think it takes away from the context in any way.

So as The Stalwart demonstrates it is no rhetorical dodge and that semantics are important.

Can We Trust Politicians?

We are currently hearing the storyline – MMT is correct (although they don’t express it that way) but god save us if anyone finds out.

An MMT understanding allows us to appreciate that most choices that are couched in terms of ‘budgets’ and ‘financial constraints’ are, in fact, just political choices.

Given there are no intrinsic financial constraints on a currency-issuing government, we understand that mass unemployment is a political choice.

Imagine if citizens understood that!!

An MMT understanding lifts the ideological veil imposed by mainstream economics that relies on the false analogy between an income-constrained household and the currency-issuing government.

Households always have to finance their spending choices, through earned income, savings, asset sales or through borrowing. A currency-issuing government spends by instructing its central bank to type numbers electronically into relevant bank accounts.

All the elaborate accounting structures and institutional processes that are put in place to make it look as though tax revenue and/or debt sales fund spending are voluntary smokescreens, which serve the purpose of imposing political discipline on government spending.

Insiders know this, but actively decline to share that knowledge with the public.

There is also a growing claim that there is nothing new about MMT – that everything we write about is “well-understood” or “widely understood and acknowledged”. Further, apparently “everybody knows” and New Keynesians are “fully aware” that the government is not financially constrained.

It is very strange – if all the major features of MMT were so widely shared and understood – how do we explain statements from politicians, central bankers, private executives, lobbyists, media commentators etc, etc that appear to not accept or understand the basic MMT claims?

    • Where in the vast body of macroeconomic literature – mainstream or otherwise – do we see regular acknowledgement that there is no financial constraint, for example?

    • Why is there mass unemployment if government officials understood all our claims?
  •  
    • It would be the ultimate example of venal dysfunctional politics to hold that that everybody knows all this stuff but are deliberately disregarding it – for what?
  •  
    • Why do economists still claim that banks lend out their reserves?
  •  
    • Why do they think that an asset swap (liquid for near liquid) engineered by the central bank will provide banks with more funds to lend as if banks wait around for deposits before they make loans?
  •  
    • Why don’t papers on banking indicate that loans create deposits rather than engage in the fiction that it is the other way around?
  •  
    • Why do economists still claim there is a monetary multiplier operating when bank reserves respond to broad monetary movements?

I could pose hundreds of like questions. I am not naive. I couldn’t answer any of these questions if the claim that everything MMT has proposed is passe in the extreme.

These sorts of claims then lead to statements that there is “nothing new” about MMT – is designed to discredit us and to suggest we are just a bunch of misguided, politically naive intellectual minions.

Please note that MMT does not include the word “new” in its descriptor. Also, if some person out there can find any literature written by one of the major MMT academics or authors where there is a claim that the theoretical structure proposed and integrated by the writers is “new” please let me know. (I wouldn’t waste my time by the way.)

The descriptor of import is “Modern” which like all descriptors can be interpreted in a number of ways. The way the MMT literature discusses the economy and integrates components from banking, the national account accounts, a deep understanding of the way bond, currency and labour markets work – is certainly modern.

It is clear that MMT writers borrow, absorb, integrate strands of theory dating back to Marx and before. There has never been a denial of that. But there are truly novel aspects of our approach that the vast majority of economists progressive or otherwise – who are slaves of the textbook framework – still do not understand despite the claims that everything is understood.

As we said at the beginning there is now a line of critics who acknowledge the validity of core MMT principles but think they are too dangerous for people to broadly share in that knowledge.

Why?

Because we apparently have reached a point in history where we hate dictators and eulogise the benefits of democracy (à la Churchill in the Commons on November 11, 1947 – “democracy is the worst form of Government except for all those other forms that have been tried from time to time”), but don’t want the politicians we elect to have the flexibility to advance our well-being.

Or in simpler language – “because we don’t trust politicians”.

This has been a long-standing view.

Remember the famous quote from American economist Paul Samuelson in the interview he did for the film – John Maynard Keynes: Life, Ideas, Legacy – where at the 52:50 mark into the film, he said:

I think there is an element of truth in the view that the … the superstition that the budget must be balanced at all times … aah … Once it is debunked … takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have … aah … anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by … aah … sometimes what might be regarded as myths into behaving in a way that long-run civilised life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year … in every short period of time. If Prime Minister Gladstone came back to life he would say ‘oh, oh what you have done’ and James Buchanan argues in those terms. I have to say that I see merit in that view.

This amounts to a world where the elites can manipulate the fiscal capacity of the state to advance their own interests (procurement contracts at will, bailouts when they mess up, etc) but if we want to do something about unemployment or poverty then the rest of us has to be held in this fictional world that appeals to our instincts of fear and uncertainty.

And, of course, we then are encouraged to distrust politicians and so it goes.

My view is that once we expose these myths, more sensible political discourse can take place.

And if we do not like our government – that is they go crazy with their spending capacity – then we throw them out of office (in Australia, every three years or so).

I also think that if the standard of political dialogue was improved, higher-quality candidates would seek election and push out the time-serving careerists who dominate all political parties.

It is an extraordinary world where we accept a deception because knowing the truth might require us to act differently.

I don’t accept that proposition. I believe that the truth will set us free and we will become more politically engaged and demand quality political behaviour.

So, can we trust politicians?  We can trust ourselves!!


This has been a remix of three of Bill Mitchell’s blogs for the State of Modern Monetary Theory today.

Welcome to the Year of Modern Monetary Theory


The year 2020 is gone.  In Australia, on average more than one article in finance, media or on popular blogs about MMT appeared every day of the year.

This slideshow requires JavaScript.

We had Alan Kohler (financial journalist), James Culham (Institutional Portfolio Management, ANZ) and  Emma Alberici (ex-ABC economics correspondent) come to somewhat of an understanding with MMT.  John Quiggin (economist) review the Modern Money textbook, Nick Gruen (economist) outline it correctly on a podcast.  RBA Governors past and present (see Gallery above) comment on Modern Monetary Theory – even appearing in the senate select standing committee of economics.  It has had many runs in both the Australian Financial Review, The Australian and other media outlets.

Here’s hoping the trend continues. 🍷


UBI Advocates want a Job Guarantee, They Just Won’t Say IT!

Cameron Murray has a great piece at Fresh Economic Thinking that I’m riffing this title off.


A Job Guarantee (JG) is a way to guarantee a certain income level to anyone willing to do tasks that some administrator decides are good.

A Universal Basic Income (UBI) is a way to guarantee a certain income level to anyone willing to do any task they decide is good.

We know that many JG advocates simply want to give people money for doing what they would do anyway if their income was guaranteed. They just have dogmatic beliefs about the dignity of work and the word “job.”

Here’s Bill Mitchell saying that you would eventually do whatever you liked in the JG (my emphasis).

The Job Guarantee in fact provides a vehicle to establish a new employment paradigm where community development jobs become valued. Over time and within this new Job Guarantee employment paradigm, public debate and education can help broaden the concept of valuable work until activities which we might construe today as being “leisure” would become considered to be “gainful” employment.

So I would allow struggling musicians, artists, surfers, Thespians, etc to be working within the Job Guarantee. In return for the income security, the surfer might be required to conduct water safety awareness for school children; and musicians might be required to rehearse some days a week in school and thus impart knowledge about band dynamics and increase the appreciation of music etc.

Further, relating to my earlier remarks – community activism could become a Job Guarantee job. For example, organising and managing a community garden to provide food for the poor could be a paid job. We would see more of that activity if it was rewarded in this way. Start to get the picture – we can re-define the concept of productive work well beyond the realms of “gainful work” which specifically related to activities that generated private profits for firms. My conception of productivity is social, shared, public … and only limited by one’s imagination.

In this way, the Job Guarantee becomes an evolutionary force – providing income security to those who want it but also the platform for wider definitions of what we mean by work!

If we are going to be this lenient and generous with the definitions of a job, why bother at all? How about being a parent, carer, child, or just a citizen? Why aren’t these “jobs”? And if they are, aren’t you just advocating for a guaranteed basic income of sorts?

The inflation concerns that JG advocates claim to have with a UBI are nonsense. They are just backfilling excuses. Obviously, most JG jobs wouldn’t in be sectors where output is priced, so wouldn’t enter inflation calculations anyway. Just like my housework isn’t priced, but could be if supplied by the market, a JG that includes my own housework would have no effect on reducing inflationary pressures.

Further, isn’t the insight of MMT that you might have to tax to reduce demand sometimes? In which case, a UBI can be easily designed to include taxes so that it redistributes in a way that doesn’t create demand-pull inflation.

Oh, and then there are people wouldn’t participate in the JG anyway, like children, the elderly and the disabled. They would have to just get money anyway.

So let’s retire the debate. Yes, the government can be a money-creator if it wants. There are only real constraints. So let’s now talk about funding things that we think are important for society over things that are not. Let’s talk about practical ways to redistribute income and wealth. Let’s get our priorities right and forget the word-games.


Now I agree that the Job Guarantee, the Universal Basic Income have Mutually Assured Goals in Concert.  So let’s make that MAGIC happen.  Many MMT proponents disagree with me but I am also an MMT advocate.  I am tired of the identity politics behind a UBI and a JG.

I have always said the JG is a UBI – it is a Universal offer for a Basic Income for perceived productive work.  When I use the word ‘productive’ here I am using it in a broad sense.  Is caring for   someone productive? Is  checking the safety of water productive? Is providing food for those in need productive? Is firefighting productive? Is studying, getting an education productive?

The answer is Yes, of course.

We all like to be productive, don’t we?  It fulfills human needs of accomplishment, self-esteem and much more.

As the futurist Alvin Toffler liked to ask at smart gatherings of business executives, ‘How productive would your workforce be if it hadn’t been toilet trained?’

What if the local level community administrator that helped with a gaps analysis to find, develop and create the JG jobs says the job is not ready to go ahead yet?  Well you still get paid the JG wage.  This makes it functionally the same as a UBI but not a pure UBI as it is in transition – just as the Carbon Pricing Reduction Scheme has a transition that was effectively functioning as a tax but the CPRS itself was not a tax.

Even John Quiggin effectively agrees with a JG though he renames it Participation Income.  A rose by any other name, smells just as sweet.  Under Quiggin’s assumptions or Bill Mitchell’s the amount we pay will not generate inflation and thus the payment’s are efficient.

I think the identity issues behind a Job Guarantee and a Universal Basic Income are those for a UBI are employed and in poor quality jobs and those for a Job Guarantee are unemployed, underemployed, long-term unemployed and/or know many people in this situation.  I think that is what it boils down to.  Those for a UBI in a poor job do not have the option currently to leave their job as they need their income.  Those for a JG do not even have that option, even the social security entitlements, if eligible, are insufficient for members of society to have Wellbeing, Inclusion, Social and Emotional engagement.  The Australian Real Progressives Be WISE philosophy.

We can refer to the Argentina near-JG experiment.  A survey asked why the participants preferred to work than receive a benefit.

  1. they felt (or would feel) useless sitting at home;
  2. they felt like they were helping the community when they were working;
  3. there is dignity in working;
  4. they were meeting their neighbors and;
  5. they were learning new skills.

This is how you generate Courage, Compassion & Connection.  I cannot see how a Universal Basic Income brings the marginalised willing worker into being WISE.

As the El Paso girl said, Why Not Both?

The JG is a universal offer that is voluntary to take up so why not add a UBI on top of the JG and make it an opt-in offer as well.