Torrens Uni Associate Prof Steven Hail is holding a two-day seminar in Auckland on August 10-11 I'll be attending. I'm curious to find about more about Modern Monetary Theory & ecological economics
Great move getting into this stream of international discussion. Looking forward to follow up discussions of the work guarantee, managing prices, and the functions of the primary bond ‘market’.
I wonder if the idea that to avoid inflation you need to only spend into an economy that has spare productive capacity - if I understand this correctly this supports our government’s choice for a high immigration rate?
An underlying question is how does the money supply affect different social strata? Is there a risk that it just replicates the crude imposition of pressure exerted by the OCR.
Great interview and super important topic - this is the future! I’d love to hear about more about jobs for ecology and also about which types of spending are more likely to cause inflation. My idea is that putting it into health services, state housing, conservation or decarbonisation transition then none of that would be.
At 7min Dr Hail perpetuates a myth that is not core MMT. The government cannot "outstrip the capacity of the NZ economy" just by spending. They cannot purchase what is not for sale. The State could purchase all goods and labour for sale, but the question is why would they want to do that? They won't, they'd get voted out of office. The nominal inflation from government bidding for available resources at higher than market prices is a price adjustment story, not a real inflation story. The real wage can still rise, and "the economy" is not "out-stripped". The proper story is about supporting the lowest wages, so we have a decent society. The target of government spending thus does not have to be concerned with deficit (aka. private surplus) or inflation, but only needs be concerned with real resource maximization (given ecological constraints!). Nominal inflation is *not* an ecological constraint, it is a psychological constraint (gets you voted out of office).
That is why most MMT'ers do not mind a few pigovian/luxury goods taxes. They limit inflation in specific sectors and provide a currency vacuum allowing government to spend --- in those sectors --- without bidding up prices.
MMT is a real possibility, but there's massive political hurdles to cross first. I fell for the' MMT is just a few key-strokes at the RB and Treasury' schtick myself when I first encountered it, but I’m pleased to report that I quickly dug myself out of the rabbit-hole when I discovered that there’s a vast array of national laws and international protocols covering 106 countries and starting in 1985 (i.e. the neoliberal era) that have been created to ‘set in stone’ the damaging neoliberal norms that need to be thrown out first.
Definitely open up. Will listen to this maybe 2 more times to understand areas of economics which elude me.
First thought is that if we tax income to fund infrastructure rather than raise interest rates on home loans& business overdrafts might have a more equal (fairer opportunity) distribution of available money.
Can someone please explain what Stephen means by “every dollar spent by government is a new dollar that they create”. I don’t understand how EVERY dollar is new. If you’re running a deficit, the money borrowed is new money issued as government debt. But doesn’t the rest come from taxes collected - that is money already in existence? Cheers
It's a sophism / tautology. According to MMT, all government spending is new money creation & all tax is money destruction. In terms of the bottom-line in government finances, it makes not a jot of difference whether you consider it as creation & destruction, or recycling of tax to expenditure.
However, by considering is as 'tax in order to spend' it becomes politically charged around the merits / demerits and size of particular expenditures, and is a good ideological fit with the Neolib concept that there is only a fixed pool of money and an increase in government expenditure comes at the cost of loss of opportunity for household expenditure.
In the reality of a modern economy, the money supply is highly flexible. Both government expenditure and private credit are sources of new money (and sources of its destruction). Thus an increase in government expenditure (deficit) puts money into private sector bank accounts when they spend it on goods and services (the reverse of last sentence of para. 2 above). When household willingness to take on credit becomes constrained for whatever reason, it is necessary for the government to 'step-up' to create new money and inject it into the economy through 'public works' to fill the gap in the money supply- or else recession ensues.
This story goes on-and-on, but basically the 'business-as-usual' narrative is designed to fiscally strangle government, which is ideally the 'practical manifestation of the will of the people through democracy', leaving established capital as the only political power.
Great answer thanks. Had to look up “sophism” - good use of that word! I think their argument is more that than a tautology. Not sure I agree with the hardcore MMT position, but certainly the current system is no longer fit for purpose so we need a post-growth model more aligned with MMT.
My position too. I favour Steve Keen's 'Post Keynesian' approach, which is basically MMT with accountancy identities and systems analysis as it's core.
MMT is an interesting subject read this.
https://open.spotify.com/show/7KQTRNekNMcBLiiygTMVOV?si=1dlhsEvGTLieaVgCqqk6Fg&preview=coverart
And gong to the movie b Wellington
Please tell me this one is publically available - I could really use it as a conversation tool!
Yep. Fully public from the start.
This is SO good :-) Thank you
See you there Bernard
Good thinking solutions
Fascinating, thanks for the solutions focus
Good thing to do Bernard. thank you.
Great move getting into this stream of international discussion. Looking forward to follow up discussions of the work guarantee, managing prices, and the functions of the primary bond ‘market’.
I wonder if the idea that to avoid inflation you need to only spend into an economy that has spare productive capacity - if I understand this correctly this supports our government’s choice for a high immigration rate?
An underlying question is how does the money supply affect different social strata? Is there a risk that it just replicates the crude imposition of pressure exerted by the OCR.
Great interview and super important topic - this is the future! I’d love to hear about more about jobs for ecology and also about which types of spending are more likely to cause inflation. My idea is that putting it into health services, state housing, conservation or decarbonisation transition then none of that would be.
Great interview - thanks Bernard (and Steven). I agree with others that this should be public.
Yep. Public from the start. Cheers
At 7min Dr Hail perpetuates a myth that is not core MMT. The government cannot "outstrip the capacity of the NZ economy" just by spending. They cannot purchase what is not for sale. The State could purchase all goods and labour for sale, but the question is why would they want to do that? They won't, they'd get voted out of office. The nominal inflation from government bidding for available resources at higher than market prices is a price adjustment story, not a real inflation story. The real wage can still rise, and "the economy" is not "out-stripped". The proper story is about supporting the lowest wages, so we have a decent society. The target of government spending thus does not have to be concerned with deficit (aka. private surplus) or inflation, but only needs be concerned with real resource maximization (given ecological constraints!). Nominal inflation is *not* an ecological constraint, it is a psychological constraint (gets you voted out of office).
That is why most MMT'ers do not mind a few pigovian/luxury goods taxes. They limit inflation in specific sectors and provide a currency vacuum allowing government to spend --- in those sectors --- without bidding up prices.
MMT is a real possibility, but there's massive political hurdles to cross first. I fell for the' MMT is just a few key-strokes at the RB and Treasury' schtick myself when I first encountered it, but I’m pleased to report that I quickly dug myself out of the rabbit-hole when I discovered that there’s a vast array of national laws and international protocols covering 106 countries and starting in 1985 (i.e. the neoliberal era) that have been created to ‘set in stone’ the damaging neoliberal norms that need to be thrown out first.
More here: https://substack.com/@kevthefarmer/note/c-60673783
...and here, on some of the more 'cultish' shennanigans of MMT fans:
https://substack.com/home/post/p-146661370?r=cfkw4&utm_campaign=post&utm_medium=web
Definitely open up. Will listen to this maybe 2 more times to understand areas of economics which elude me.
First thought is that if we tax income to fund infrastructure rather than raise interest rates on home loans& business overdrafts might have a more equal (fairer opportunity) distribution of available money.
Very timely! Any chance of similar weekend workshop in Poneke Wellington?
Can someone please explain what Stephen means by “every dollar spent by government is a new dollar that they create”. I don’t understand how EVERY dollar is new. If you’re running a deficit, the money borrowed is new money issued as government debt. But doesn’t the rest come from taxes collected - that is money already in existence? Cheers
It's a sophism / tautology. According to MMT, all government spending is new money creation & all tax is money destruction. In terms of the bottom-line in government finances, it makes not a jot of difference whether you consider it as creation & destruction, or recycling of tax to expenditure.
However, by considering is as 'tax in order to spend' it becomes politically charged around the merits / demerits and size of particular expenditures, and is a good ideological fit with the Neolib concept that there is only a fixed pool of money and an increase in government expenditure comes at the cost of loss of opportunity for household expenditure.
In the reality of a modern economy, the money supply is highly flexible. Both government expenditure and private credit are sources of new money (and sources of its destruction). Thus an increase in government expenditure (deficit) puts money into private sector bank accounts when they spend it on goods and services (the reverse of last sentence of para. 2 above). When household willingness to take on credit becomes constrained for whatever reason, it is necessary for the government to 'step-up' to create new money and inject it into the economy through 'public works' to fill the gap in the money supply- or else recession ensues.
This story goes on-and-on, but basically the 'business-as-usual' narrative is designed to fiscally strangle government, which is ideally the 'practical manifestation of the will of the people through democracy', leaving established capital as the only political power.
Hope this helps...
Great answer thanks. Had to look up “sophism” - good use of that word! I think their argument is more that than a tautology. Not sure I agree with the hardcore MMT position, but certainly the current system is no longer fit for purpose so we need a post-growth model more aligned with MMT.
My position too. I favour Steve Keen's 'Post Keynesian' approach, which is basically MMT with accountancy identities and systems analysis as it's core.
https://profstevekeen.substack.com/