Welcome to MMT land

On Tuesday the central bank put out assurances, announcing that meetings had been held with foreign exchange dealers, representatives of commercial banks and the business sector to try and halt the slide.

“Based on its strategic planning policies, Da Afghanistan Bank has always tried to avoid volatility that could be harmful to the purchasing power of the people,” a statement said.

Taliban spokesman Zabihullah Mujahid added that a meeting of the council of ministers has also instructed the government’s economic commission to “take urgent steps to ensure the stability of the afghani”.

The regime has also closed Kabul’s main money market, Sarai Shahzada, and shuttered bazaars in western Herat and southern Kandahar. By Tuesday night the currency had rallied slightly to 115, but traders were sceptical of the central bank’s ability to reverse the slide.

Agreed, this isn’t exactly like our own dear Bank of England.

But the Afghan government does control the printing press, it does insist upon afghanis being used to pay tax – which is what provides the currency with its value – it does indeed tax and so on.

So, why the collapse in the value? Because, as MMT often does admit, fiat currency has value just because folks believe it does. When that belief goes then currency doesn’t have value. Obvious enough. But what MMT then doesn’t admit is that government does not, in fact, control beliefs. Therefore it doesn’t control, in the end, the value of the currency.

It’s what every other bugger out there believes that matters, not what government says.

2 thoughts on “Welcome to MMT land”

  1. I’d argue that the average Afghan believes that, since the awful Islamophobes of the West are no longer lavishing loot on Afghanistan, there’s nothing for the bits of paper to buy. So they might as well exchange it for whatever they can get.

  2. This Taliban bunch sure does act like the dog chasing the auto down the street. And now that he’s caught it is flummoxed as to what comes next.

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