It’s a fairly strong claim, isn’t it?

What MMT says is really quite simple. Firstly, using the logic already noted, it points out that governments cannot go broke because they can always create the money required to pay their debts. In turn this means that they can always control interest rates. Then MMT suggests that the proper role of money is to serve the economy, and not wealth, so full employment should be the objective of an economy; until this is reached inflation cannot be created within an economy, except as a result of political or external shock that economic policy cannot control.

Given that this is a publication elsewhere this has to be taken as Ritchie’s considered opinion, not just fist typing.

Governments cannot go bust, can always control interest rates and inflation never arrives before full employment.

I’m not certain that reality agrees here.

20 thoughts on “It’s a fairly strong claim, isn’t it?”

  1. Its the usual ‘not real socialism’ argument. No country has ever implemented MMT ‘properly’ so all historical examples of why its a complete pile of sh*t are not relevant……….

  2. ” Governments cannot go bust, can always control interest rates and inflation never arrives before full employment.”

    ‘ Laughs in Weimar Germany.’

  3. Is this the “missing chapter” from the other publication by the organisation from which Murphy was expelled left in a huff?

  4. Governments cannot go bust. Correct. In so far as it means they can always print money to repay existing debts. But…and this is a giant elephant in a toilet cubicle sized but…they will thereby destroy their currency. Who cares if HMG can repay our £2trn debt if a Mars Bar costs a million? ‘Bust’ means you can’t buy the things you need. SO yes a government CAN go bust. Ask the Venezuelan people.

  5. If a government imports anything and thereby incurs debt in a foreign currency its ability to print Z$1000000000 notes does not prevent it going bust.

  6. I have postages stamps from Germany from a period when, even if the government didn’t go bust, it caused a lot of problems for daily life. Does anyone really want to go to 1924?

  7. Hmm, to go bust is to be forced into liquidation of assets by creditors, so whether a govt can go ‘bust’ depends on whether it can be ‘enforced’ on, nothing to do with money when push comes to shove.

  8. To go bust means that you cannot meet your obligations as they fall due which is why countries can go bust if they have foreign currency debt because they cannot print their way out of trouble.

    This is often accompanied by an exchange rate in freefall (Turkey today) followed by a reluctance of the citizenry to accept payment in domestic currency with a preference for dollars or forms of barter or tokens of exchange like, once upon a time, ciggies.

  9. governments cannot go broke because they can always create the money required to pay their debts

    Argentina had no hope of printing the dollars needed to pay their debts denominated in that currency earlier this century. Hence a lot of lawfare with debt holders. And they’ve just defaulted again.

  10. @The Meissen Bison
    “To go bust means that you cannot meet your obligations as they fall due which is why countries can go bust if they have foreign currency debt because they cannot print their way out of trouble.”

    – well I would have to disagree with you there, to go bust is to be forcibly liquidated by the creditors, NOT the de-facto state of being unable to make repayments.

    If a govt ‘cannot meet its obligations’ then it is more likely the creditor than the govt that will fear the bailiff’s knock.

    The chain reaction of economic catastrophes that you mention are indeed very real, but even a destroyed economy is not a govt ‘going bust’. Consider for example Zimbabwe, which visited upon itself this very fate – the govt (like Rome) still stands. “Harare manet”.

    I would suggest that for a govt to ‘go bust’, then its chief executives (politicians and senior civil servants) must be replaced by officers of the creditors choosing, to the benefit of the creditors, and all that that implies.

  11. Harry Haddock's Ghost

    I would suggest that for a govt to ‘go bust’, then its chief executives (politicians and senior civil servants) must be replaced by officers of the creditors choosing, to the benefit of the creditors, and all that that implies.

    Didn’t that basically happen to Grease?

  12. Greece might actually be the best description of a govt going bust as the bail out (creditors) effectively set government policy or at the least targets which meant govt only having a limited range of choices (cut A or cut B or a bit of both).

  13. Indeed and the unusual and interesting feature of the Greek case is that Greece does not have it’s own currency which is ultimately under control of Frankfurt and Brussels rather than Athens.

    If Varoufakis had had his way, Greece would have been in control instead of being spavined.

  14. Spud says: “…full employment should be the objective of an economy; until this is reached inflation cannot be created within an economy, except as a result of political or external shock that economic policy cannot control.”

    As MMTers printed more and more money, the exchange rate would drop, imports would become more expensive, and inflation would have arrived through domestic economic policy. Thus I refute him, to echo Dr Johnson.

  15. What does MMT say about raising tax rates so high – to remove money from the economy to prevent inflation – that it eliminates the incentive to work?

    How much infrastructure can the government build if no one considers it worth picking up a shovel?

  16. What does MMT say about raising tax rates so high – to remove money from the economy to prevent inflation – that it eliminates the incentive to work?

    They’d probably say that the idea that people don’t want to work is a neoliberal myth and that there’s plenty of tax money to be raised due to tax avoidance, offshore, the megarich.

    The exercise as to what would happen to inflation if all the tax currently being avoided were in fact collected is left to the reader.

  17. Agammamon

    Prior to being around the 200th person banned from Tax Research UK I actually managed to get Murphy to admit to disincentives being a valid economic concept. He soon walked it back but it was a rare occasion where he allowed reality to intrude on his delusions. Of course even his cromagnon brain realized that to admit this concept (together with the other staple of ‘A’ Level economics, the ‘Free Rider’ principle in effect brings his entire edifice crumbling down in a heap – so unless it’s masquerading as the likes of ‘Chang Song Taek’, ‘Erich Honecker’ or other such advocates of ‘The Green New Deal’ I’ve been persona non grata ever since…

  18. Van Patten – well that’s a coincidence. I have been Erich Honnecker (and the rest of the SED nomenklatura)at one time or another over there. All part of the five year plan.

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