AskProfWolff: What is Modern Monetary Theory?

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[bethanyhunt]

Stephanie Kelton made a great point when she said that we shouldn't ask "can we afford the money?": it's really a question of whether we can afford the resources and labour needed to get stuff done. Another way is to say that the only limit to government spending is the productive capacity of the nation.

[jessecool]

Ultimately MMT basically shows that governments are able to choose who they want to give money too. Fiscal constraints are mostly just arguments about who should get more than others.

[waikikiman]

You have nearly got it now, except Sovereign governments do not need to create debt to create money. They can spend it directly into the economy.
The whole process of first creating Government bonds and exchanging these with a central bank for money, is all smoke and mirrors, that serves only to enrich the elites and the banking sector.It can and should be eliminated.
Sovereign governments can create debt free money by spending it directly into the economy.

On the other hand, you have still not quite got it regarding commercial banks.
You implied that they still use a fractional reserve system when creating money from debt,
They do not, and have not for at least 50 years.
Their only consideration is whether they can balance their books at the end of each day, basically their liquidity.

The English Bank Charter Act of 1844 took the first step to preventing banks from issuing their own currency (Bank Notes). The Federal Reserve act 0f 1913 did the same for US Banks.

But commercial banks got around this by creating ledger money as debt, firstly as checking Accounts (sometimes referred to 'Check Money') and later as electronic money.

Today, as much as 97& of new money is created by this process. How much is created and how it
 is allocated is almost solely decided by private individuals for their personal profit.

Once again governments need legislation to stop this practice and to take back full control of a nations money supply and to some degree its allocation.

[ernststravoblofeld]

Finally, someone says that taxation is just a monetary policy management technique.

[OgallalaKnowhow]

The fact that modern bank money is created / distributed on an electronic platform is not that important.

The point is that money is an accounting phenomenon that exists according to rules of double entry bookkeeping.

Money is created as a positive asset and a negative liability on respective accounts, which then get distributed as the costs of production. Whether those entries are transcribed on paper ledgers and then issued as coins & paper or digital ledgers and issued as electronic deposits is a secondary concern.

It's incorrect to say that governments can create money without incurring debts. That betrays a misunderstanding of the rules of double entry. What MMT emphasizes is that sovereign governments can issue money as central bank liabilities.

[onelove]

I'm pretty sure that this guy is wrong about the significance of electronic money. MMT is a true descriptive theory when a government has a simple monopoly over its own currency, regardless of the prevalence of electronic money.

[pgbollwerk]

Superbly concise and easy to understand explanation. Thanks!

[behappybrother]

we salute red salute to Comrade Richard✊✊✊✊. India

[robertdabob]

Thumbs up for Richard Wolf as Bernie's Treasury Secretary.

[prognosis]

Money is like the placebo effect, if you explain it to people, it may stop working

[philipschaefer]

If countries can print money to get out of fiscal downturns then explain why throughout history every country that tried it failed.

[samsonlovesyou]

Think I need an infographic to follow this one 😐

[ivorykhan]

Last 30 seconds sums it up nicely. Thank you, Professor.

[SDscrch]

a good thing to keep in mind...
"figures never lie - liars always figure"

[BullwinklJMoose]

Richard looks like he smoked a big ole doobie here. Rock on, brother! Keep telling the truth!

[tedmcfly]

I love you, Dr. Wolff! I'm a huge fan of yours! I was introduced to you through The Jimmy Dore Show. Please make more guest appearances!

[jacobklein]

MTT is refuted by the performance of Singapore. They had a budget surplus of 3.84% GDP in 2009 and has no net debt when assets and liabilities are booked. According to MTT they should have a lot of slack, with high unemployment and low productivity. The opposite is true, they have low unemployment and high productivity.

[xaviercortinaz]

Richard is so much fun to listen to. I want to hear him have a conversation with Asher Edleman. To see where they might agree and disagree.

[jpdj]

I don't understand "Modern", your honour. I was taught 50 years ago already that primary banks could "create" money through loans based on a lever between deposited money and lent money. The idea of the bank's liquidity (reserve) was part of that lesson in secondary school. At that time, computers started to appear, but the principle must be older, so the idea that creation of money is linked to bits and bytes makes no sense.
Again, I don't understand why "modern".

[ujku]

So in all this debate, why at all do we still have to work? Why paying for education from own pocket? Why reducing budget for education in first place? Why healthcare is a problem? What is giving value to things? Why not having infinite UBI? We will definitely have more thinkers, more people doing what they like? Can MMT answer?