Richard Murphy says:
June 14 2021 at 12:48 pm
As I have explained a number of times before both MMT and QE (there is no difference in this case) create central bank reserve account balances for clearing banks
It does not matter how the money is used, a government deficit will always = greater private wealth. QE has done this at varying rates, but the benefit has always flowed to those already wealthy
This is what the sectoral balances and multipliers mean
So, QE and MMY always increase inequality
Gilts would withdraw that from circulation. In MMT and QE they are not in use
So, something else has to happen and that must be other forms of tax e.g. taxes on wealth in various forms unless inequality is to be tolerated, which it should not b because of the social harms it causes
Have you noticed what this insistence does? It completely kills MMT as a useful tool.
Because that MMT tale is that we don’t need to have higher taxes to fund spending. Except, now we do need to have higher taxes. Not to fund, certainly, but to reduce the induced inequality.
Actually, he is now sometimes saying that deficit spending increases inequality. Therefore we need higher taxes because deficit spending. Which also means that we can’t use deficit spending. Because we must have higher taxes when we do deficit spending.
He’s just entirely killed the idea of fiscal stimulus that is. Which is pretty good even for someone with three professorships.
He’s actually ended up with some perversion of Ricardian Equivalence. Not that deficit spending won’t work because everyone saves to offset future tax rises, but that we have to increases taxes now as we do deficit spending to reduce inequality.