I’ll take “things that didn’t happen” for $500, Alex

‘Just when I think I’m winning
When I’ve broken every door
The ghosts of my life blow wilder than before
Just when I thought I could not be stopped
When my chance came to be king
The ghosts of my life blew wilder than the wind’

Fisking Part 1…

People keep asking me the question, “What if the UK openly adopted modern monetary theory? Would markets panic and run? Suppose they did. What would happen then?” people say to me, and what I want to show is that if they did, and I don’t think they would, that panic could be turned into a plan to build a stronger Britain.

He is hearing the siren voices – ‘Heil Murphy’

In other words, what we’re dealing with is a load of hype, misinformation, and nonsense, none of which is related to any form of reality that I can recognise. But the reality that I can see as a possibility of openly acknowledging that modern monetary theory is not only true, but can change the way in which we manage the economy, and that’s all positive.

An interesting paragraph in that he isn’t in the real world. His reality is not one that exists in the real world. The absurd notion that MMT reflects reality is clear evidence of hype, misinformation and nonsense.

First of all, modern monetary theory is not a policy. It is simply a description of how money works. More than that, it is actually a description of how money works now. We never need to adopt modern monetary theory for the UK to use modern monetary theory because modern monetary theory explains what the UK government already does.

I’d say there’s disagreement even among MMT advocates over the details. Warren Mosler (for example) has been described as ‘just wrong’ by Murphy. Who is correct? Are either?

The UK government has its own central bank.

Which has to do with the price of fish?

It has its own tax system.

Again – great, fine and dandy..

The rule of law applies in this country.

Some would question that in the wake of the Starmer government but we’ll let that pass for now.

And every single day when the government issues an instruction to the Bank of England to make payment for something that has been approved by a Budget passed by Parliament, the Bank of England has no choice but make the payment, and it never looks in the government’s bank account to see if there’s enough money there or not, because it doesn’t need to, because legally it can simply mark up the government’s overdraft, which it runs on its behalf, and make the payment to whomsoever the government has instructed. That is the economic fact and reality of what goes on between the Treasury and the Bank of England every day, and that is what modern monetary theory describes.

Based on Bond Markets and the current situation in Japan we are probably not far from the point where this will no longer apply, and as in Zimbabwe the theory comes crashing down in a heap. Interesting that the theoretical approach of neoclassicists is inadequate because ‘it doesn’t correspond with the real world’ but the MMT basis for its action is somehow an iron clad law.

MMT, for short, simply says that the Bank of England can, like any other bank, the fact of which has been acknowledged by central banks around the world, create money out of thin air by simply picking up a computer keyboard and entering two numbers, one of which is a positive, and the other of which is the exact opposite, except it’s a negative. One of which records a payment, and one of which records the fact that the bank is owed back the money that it has just paid out on behalf of its customer; the customer, in this case, being the government.

I’ll leave Rocco to comment on whether this corresponds to his experience of ‘Double entry’

Weimar wheelbarrow will become the Murphy wheelbarrow in history books.

I was under the impression the UK adopted MMT in 2008. With another (un)healthy dose of adoption during Covid. So if you want to know what happened, you only have to look. Markets are at the panicking stage, aren’t they?