Tag Archives: Richard Holden

Hamilton Holden Hutley Hound MMT

In April 2020 the Economic Society of Australia (ESA) held a webinar about the Australian Government’s fiscal response to the COVID Crisis. It included economists Steven Hamilton, Richard Holden, and Nicki Hutley facilitated by Shane Wright. Towards the end of the webinar, there was a Q&A, and questions were asked about Modern Monetary Theory.

As you will see we get the usual misinformation that its printing money; that QE is printing money; that it is printing money indefinitely and; there’s a Debt to GDP ratio limit (per Reinhart & Rogoff); as well as worry about the credit rating agencies; and the hyperinflation argument.


Nicki Hutley

Stephen and Richard will answer this question far far more theoretically than I will.
You know I’m following the debate interestingly and I love reading Krugman who’s just so into this and he’s very animated at the moment.

I like to call it magical monetary thinking. There are certain assumptions that you need to have for MMT to hold true; and one of them, obviously, if you look at Japan you could say well 200 percent Debt to GDP you know not not harming them.

There are a few things and there’s the Rogoff and Reinhardt study that sort of says when you get to a certain level of Debt to GDP it has an impact on your long-term growth for a start.

There’s also this assumption that everybody will that there won’t be some confidence effect, that rating agencies won’t come in and increase the price of your debt – that you can just keep wearing down the debt through growth and because growth is higher than the level of the interest rate and that is not always true. It might hold true for a while but it won’t hold true permanently. It’s a bit magical thinking to believe that we could suddenly, suddenly the world is completely different from everything that economic theorists have have held true for a long time.

[I’m] not saying that these theories don’t change over time but I’m certainly not convinced.

Steve Hamilton

Here’s all I’ll say as far as I can tell I had to ask someone what MMT was not that long ago.
to be honest with you as far as I can tell it’s a combination of two things. A set of things that almost every economist agrees with and then a set of things that almost every economist thinks are totally insane.

Right! So if we deal with the first group first it’s not news that there’s a thing called the inflation tax; like yeah of course we can fund anything we want by printing money that’s not news; you could do that but you’ll pay for it in inflation.

I think there is a set of MMT proponents that sort of it’s have it’s essentially an empirical question there’s a set of MMT proponents that think you can do it without an inflationary consequence and I think to me at some point inflation has to bind right otherwise you just print in infinite, infinite amounts of money and and we have to agree that some point inflation is going to bite.

So I kind of think we don’t need to think about MMT so much we can just say yes it makes sense the Reserve Bank uh is is is is doing its darnedest to keep buying bonds through QE right and in the short run we can get away with this printing money to pay for these kinds of assets without sparking inflation and I 100 per cent agree we should do that; but to do that infinitely and forever, I don’t know. I suspect Richard has a similar view.

Richard Holden

Let’s be clear QE is not MMT. And you know Phil (Lowe) was at pains to make that point yesterday that they’re buying on the secondary market they’re not just printing money they’re buying bonds. Right Japan issues bonds okay. The MMT folks say you don’t need to issue bonds you can just print money.

I think the way to think about that is the government’s balance sheets got a balance. What’s on the asset side the present discounted value of all future tax revenue that they can collect. What’s on the liability side? There’s bonds and there’s money. Okay now you can always issue more liabilities to cover liabilities but what happens if people think the market thinks you’re not being able to cover that at some point on the asset side with future tax revenues?

Well, the price of money falls – so what does that mean, it means inflation goes up right!? So that’s what’s sometimes known as the fiscal theory of the price level.


And the empirical evidence none of these MMT folks like it when you say Weimar Germany or Venezuela or Zimbabwe but you know try try France in 1981 under the Mitterand government that try
to put their feet their sort of toe in the water on this and inflation started getting out of control very quickly and had to reverse course or Germany under Gerhard Schroeder in 1998 same sort of thing

so um I think as Steve said the idea that
deficits that we can’t have like you know 80 per cent or 90 to use the Reinhardt Rogoff number Net Debt to GDP and some; there’s some magic number in which case it all falls apart that’s clearly wrong the idea that we can’t have a strong fiscal response is silly.

The idea that we can print money not issue bonds um and get away with it indefinitely that really is silly


Holden improves from his piece at The Conversation called “Printing Money is not the solution to all economic ills” and that is a genuine positive as it shows an evolution in his thought. I say he improves because unlike others he recognises that QE is not MMT. Unfortunately they all seem to be a little obsessed with seigniorage.

Please follow the links throughout this post as they correct the misunderstandings these economists have.

In fact, nothing described by any of these economists even resembles MMT. They would all do well to read the Explainer: What is Modern Monetary Theory?

Australian Progressive Economists are at it Again!

As Kate Raworth says in Doughnut Economics, economics is the mother tongue of public policy.  So it is vitally important to understand the operational interactions of economics correctly to formulate public policy.

Nominal Progressive Economists like John Quiggin, Andrew Leigh, Richard Holden and others are at it again.  Andrew Leigh and his colleagues have an issue with Modern Monetary Theory but have not done their most cursory research about the constituent parts of MMT.

Real Progressive Economists should have a real connection with Keynes and Kalecki and other economists done correctly and not what Joan Robinson called “Bastard Keynesianism”.

Every Modern Money Theorist and other MMT proponents would agree that MMT and “conventional economic thinking” can arrive at the same or similar conclusions.

What follows is an adaptation of the work of the Swiss MMTist Andrea Terzi.

Modern Monetary Theory has historical precedents.

First, the notion—developed by Adam Smith—that the wealth of a nation is measured not by monetary values, but by its capacity to produce goods and services.

Second, the notion of money—developed by John Maynard Keynes—that any modern state claims the right to declare what money is.

While Smith’s concept hints to full employment as the primary policy objective, Keynes’s concept hints to the management of money as instrumental to reach such objective. Furthermore, MMT explicitly recognises that the currency itself is a public monopoly.

This leads to an appreciation of the monetary system fundamentally different from the conventional economic thinking / bastard keynesianism paradigm.

What follows is a summary of eight key differences between these two models:  the Bastard-Keynesian paradigm (BK) and the Modern Money View (or MMT).

1.
BK – The central bank controls the money supply indirectly through its power to control the monetary base.

MMT – The private sector uses bank deposits as money, and bank deposits are not directly controlled by the central bank: they get created by government spending and bank loans.

2.
BK – Because the central bank controls the money supply, it also controls the nominal interest rate in the money market.

MMT – Because it is the monopolist of money, the central bank controls the interest rate.

3.
BK – The long-term nominal interest rate is determined by private preferences about real saving and investment, as well as by inflation expectations.

MMT – The central bank has the power to control the interest rate at any maturity: the interest rate is a purely monetary phenomenon.

4.
BK – A monetary expansion can expand output and employment temporarily and yet, at some point, it generates inflation.

MMT – Any operation by which the central bank buys or sells financial assets does not make the private sector any richer and has little or no consequence on private spending decisions.

5.
BK – Government decisions are largely driven by short-term personal goals of politicians, and thus the management of money should be the responsibility of an independent institution with a long-run horizon.

MMT – While monetary policy can only set interest rates, fiscal policy is much more powerful, since any deficit of the public sector generates an equivalent financial surplus of the private sector, and thus affects spending decisions.

6.
MK – Taxes serve the purpose of financing government spending.

MMT – Because government spending takes resources off the private sector and simultaneously generates income and wealth in the private sector, it will cause inflation from excess demand unless a sufficient amount of taxes is levied on the private sector.

7.
BK – If the government spends more than its tax revenue, it must borrow funds from the private sector, and this reduces funding to the private sector.

MMT – Unless it loses its power to define what money is, the government is the currency issuer: It faces no funding constraint, and it must spend or lend first, before the economy has the funds needed to pay taxes and buy government debt.

8.
BK – Price stability is a precondition for economic growth and job creation.

MMT – A government deficit of a size that matches the private sector’s desire to accumulate financial savings is a precondition for full employment.

Modern Money takes many strands of classical economists, Keynesian economists and Post-Keynesian economists and weaves a consistent coherent synthesis of the many strands to describe the operationally correct procedures of the macroeconomy.

Once these are understood and not mythologised into deadly innocent frauds, noble lies or rules of thumb heuristics it opens up policy space.

So then you can argue for your public policy goals, whatever they may be, not just on their own terms but in a holistic complete way without any misunderstandings.

Australian Economists and Modern Money Theory

Australian economists and others are finally entering the public discussion on Modern Money(tary) theory.  It is welcome.  Below are the tweets that inspired this post (re-post).  The post itself comes from Andrea Terzi whom you can follow on twitter @ndrea_terzi.

Australian Real Progressives has previously dealt with many misconceptions about Modern Money(tary) theory.  Australian audiences should have discussions with Bill Mitchell, Martin Watts, James Juniper, Phil Lawn, Rohan Grey and Steven Hail to discover the nuance and complexities of Modern Monetary Theorists and how it differs from ‘smart traditionalists‘.  Hopefully, the post below goes some way to addressing the differences.


The Civilized Money View (aka MMT, or Modern Monetary Theory) has historical precedents:

First, the notion—developed by Adam Smith—that the wealth of a nation is measured not by monetary values, but by its capacity to produce goods and services.

Second, the notion of money—developed by John Maynard Keynes—that any modern state claims the right to declare what money is.

While Smith’s concept hints to full employment as the primary policy objective, Keynes’s concept hints to the management of money as instrumental to reach such objective. Furthermore, MMT explicitly recognizes that the currency itself is a public monopoly.

This leads to an appreciation of the monetary system fundamentally different from the traditional Monetarist-Keynesian paradigm.

What follows is a summary of eight key differences between these two models: the Monetarist-Keynesian paradigm (MK) and the Civilized Money View (or MMT)

1.
MK – The central bank controls the money supply indirectly through its power to control the monetary base.

MMT – The private sector uses bank deposits as money, and bank deposits are not directly controlled by the central bank: they get created by government spending and bank loans.

2.
MK – Because the central bank controls the money supply, it also controls the nominal interest rate in the money market.

MMT – Because it is the monopolist of money, the central bank controls the interest rate.

3.
MK – The long-term nominal interest rate is determined by private preferences about real saving and investment, as well as by inflation expectations.

MMT – The central bank has the power to control the interest rate at any maturity: the interest rate is a purely monetary phenomenon.

4.
MK – A monetary expansion can expand output and employment temporarily and yet, at some point, it generates inflation.

MMT – Any operation by which the central bank buys or sells financial assets does not make the private sector any richer and has little or no consequence on private spending decisions.

5.
MK – Government decisions are largely driven by short-term personal goals of politicians, and thus the management of money should be the responsibility of an independent institution with a long-run horizon.

MMT – While monetary policy can only set interest rates, fiscal policy is much more powerful, since any deficit of the public sector generates an equivalent financial surplus of the private sector, and thus affects spending decisions.

6.
MK – Taxes serve the purpose of financing government spending.

MMT – Because government spending takes resources off the private sector and simultaneously generates income and wealth in the private sector, it will cause inflation from excess demand unless a sufficient amount of taxes is levied on the private sector.

7.
MK – If the government spends more than its tax revenue, it must borrow funds from the private sector, and this reduces funding to the private sector.

MMT – Unless it loses its power to define what money is, the government is the currency issuer: It faces no funding constraint, and it must spend or lend first, before the economy has the funds needed to pay taxes and buy government debt.

8.
MK – Price stability is a precondition for economic growth and job creation.

MMT – A government deficit of a size that matches the private sector’s desire to accumulate financial savings is a precondition for full employment.

This post is Creative Commons Attribution-Noncommercial-Share Alike 2.5 Switzerland License and I dare say any other country as well. It first appeared here via Franklin College’s Andrea Terzi.

I felt it was that important it had to be shared with a larger audience.  Of note is that the MK paradigm mentioned throughout is the traditional current orthodox neoclassical approach used in mainstream economics today.

Repost: Five (5) Things To Read To Understand Modern Money (MMT)

This is a repost of the original Five (5) Things To Read To Understand Modern Money (MMT) that has since been treated and edited and appears on RealProgressivesUSA.com

There is ‘much ado’ in the media, from business and economic commentators, about Modern Monetary Theory. Everyone from Adam Triggs to John Quiggin to Michael Pascoe and Richard Holden and even Andrew Leigh seem to have something to say.

Anyone that wishes to comment on Modern Monetary Theory is best advised to go to a primary source of the Modern Money developers. These include Australia’s own Bill Mitchell and Martin Watts, as well as many scholars from the University of Missouri-Kansas City, Bard College in New York, and other institutions. The full list has grown to be quite long, and this could never do a comprehensive list justice, but those that should be viewed as a primary source include Warren Mosler, Randall Wray, Stephanie Kelton, Pavlina Tcherneva, Mat Forstater, Scott Fullwiler, Fadhel Kaboub, Rohan Grey, Raul Carrillo, and Nathan Tankus.

A number of simple articles and social media threads are out there to clear up some perceived confusion about Modern Money. None of the commentary below is intended to replace over 25 years of academic work, which can be found at the scholarly institutions.

The first is 20 Simple Points to Understand Modern Monetary Theory by Warren Mosler. Mosler has published several books, explaining these further in mostly simple terms, but grasping the full intent of these points is essential to understanding how today’s Modern Money works.

Next, Scott Fullwiler elaborates on the differences between currency creation and the expenditure of currency. This nuance is frequently overlooked in discussions of Modern Money. Fullwiler shows the effect on central banks and the interest rates determined by central banks.

Thirdly, there are a number of Frequently Asked Questions that I have researched. They are questions commonly asked by those who are discovering Modern Monetary Theory for the first time. These include links to the Modern Money scholars’ accessible works, and links to financial commentary in the media for further reading, on any particular question that anyone may desire to delve.

Rohan Grey continues this list, with mischaracterizations and misconceptions of Modern Monetary Theory. Grey dives deep into how Modern Monetary Theory is applicable to ALL countries, its relationship to the role of institutions, and how it affects economic behaviour and its relationship to the law.

Fifth and finally Raul Carrillo addresses some other typical criticisms of Modern Monetary Theory. Carrillo demonstrates that Modern Monetary Theory is rooted in legal, sociological, anthropological, historical, and cultural foundations. Modern Money can offer insights into what we generally deem to be beyond monetary & fiscal policy. Ideas about labour, banking, development, ecology, inequality, trade & payments have consistently been part of Modern Money thought.

These simple references are to allay any source of confusion, with what media commentators are calling Modern Monetary Theory compared to actual Modern Monetary Theory. It is a comprehensive body of knowledge that is a synthesis of chartalism, credit money, Godley’s stock-flow consistency, functional finance, endogenous money, Minsky’s financial instability hypothesis and the work of Marx, Keynes, Kalecki, Veblen and post-Keynesian and institutional thought.

The textbook Macroeconomics by Mitchell, Watts, and Wray is for those who would like a more scholarly introduction. It is the textbook of the future.

The Weasel Word: Seigniorage

Like many words in economics, seigniorage is a bit of a weasel word as it depends on the context it is used.

In a commodity currency, the authority would produce coinage with face-value exceeding commodity value. Seigniorage was the difference between those values. That is simple enough.

What does it mean in a fiat economy though?

John Quiggin provides us with an answer:

 …the value of the net increase in money issue is referred to as seigniorage. To the extent that seigniorage is consistent with stable inflation, it is achieved by mobilising previously unemployed resources.

Now putting that in Modern Money terms, all that says is that the creations all net financial assets are seigniorage.  That is all.  Pretty fancy word to say nothing at all.  Only public spending can create net financial assets.

It renders the question asked by Labor Advisor Richard Holden moot.

So here’s my challenge to the modern monetary theory crowd. Please state a formal, precise, economic model in which a monetary authority can extract an infinite amount of real resources through seigniorage. Or be quiet.

He was thoroughly schooled in the comments in the article and at no point has anyone said extract infinite resources.  Modern Money has always said resources or if you prefer inflation is the constraint.

So in the end, seigniorage is a pretty meaningless Humpty-dumpty word.  All it means is spending capacity moderated by inflation.

So what amount of real resources can be extracted through seigniorage (spending)? What is the scope for seigniorage?

As much as desired, as long as you have access to the resources and are creating productive capacity.


Related questions are:

Is MMT just printing (spending) money?
Is MMT just quantitative easing? (also known as printing money)
Is MMT just monetary policy as it refers to QE and ‘monetary’ is in the name?

The answer to all the above is no.

QE is just a financial asset swap (bonds for cash) and the rest has been addressed by Scott Fullwiler and in our 5 things to read.

These questions often come up (as statements) consistently so there may be a post to address them in the future.

Meanwhile, recently Bill Mitchell, modern money economist, has had words about seigniorage.