What Makes MMT Unique? What Do I Have to Add to the Conversation?

I am going to answer that second question first, but to explain what I think is unique about my approach, I’m going to provide a long list of people who’s work I would either recommend, or have studied in depth.

Intro: People to Read or Watch

Whether or not I would call myself an “MMTer” I overwhelmingly agree with the work of the MMT founders: Kelton, Mosler, Wray, and Mitchell. I think they have made unparalleled contributions and tirelessly and generously offered amazing insights. Also I think many other academics and commentators do high quality work as well:

MMT and Related Recommendations

• Pavlina Tcherneva

• Brian Romanchuk

• Nathan Tankus

• ActivistMMT

• AppliedMMT

• Steve Keen

• Ty Keynes

• MMT podcast with Patrician and Christian

• Cory Doctorow

• Macro n Cheese with Steve Grumbine

• Sam Levey

• Phil Armstrong

• Neil Wilson

• Matthew Forstater

• Brett Scott

And I could make another list of less MMT focused commentators that I find to be worth reading and following:

Non-MMT Recommendations

• Marianna Mazzucato

• Perry Mehrling

• Matt Levine

• Mark Blyth

• Gary’s Economics

• “Money for the Rest of Us” on youtube

• Eurodollar University with Jeff Snider

• Claudia Sahm

• George Robertson

• Ann Petifor

• “Money and Macro” on youtube

And finally there are a number of commentators who I would give a mixed recommendation, some of their stuff is good, and other parts I would dispute, but they still offer high quality discussion on important ideas:

Mixed Recommedations, Some Good Ideas, Some Maybe Not

• Pragmatic Capitalism by Cullen Roche

• George Gammon

• George Selgin

• Brent Johnson(Dollar Milkshake)

• IridaTV with Dylan Moore

• Dylan Ratigan

• Scott Santens

• ANEP Economics

• Alex Howlett

With such a deep list of high quality and accomplished commentators to choose from, what do I have to offer further to the conversation here?

My Goal: Unify Public and Private Finance to Reach A Different Audience

My goal is to make persuasive arguments to certain groups who might otherwise be resistant to MMT ideas, by showing how MMT insights can be simplified and generalized. Public and private finance on paper can look very similar.

My basic argument is that all financial assets are a monopoly of their issuer not just sovereign currencies, which is the focus of MMT. Even private financial assets like equity shares and debt are nominally unlimited, and only limited by the market price as more is issued. So a private company could issue unlimited quantities of shares, and the only constraint on them is real resources and share price.

This statement is an equivalent parallel to saying that a currency issuer can buy anything for sale in that currency, and the only limit is inflation. While equity financing is typically a two step process: sell shares for currency, and then spend that currency, as long as the share price of a company does not fall(have inflation), the company can keep buying anything until there is nothing left to buy, and the real resource limits of an economy have been exhausted.

There are practical reasons why the share price of private companies is typically much more volatile than you would see in the inflation of currencies, and more importantly, why share price is likely much more sensitive to issuing more shares.

But even so, the constraint is the same: a company can buy anything for sale until their share price falls, and a currency issuer can buy anything for sale until the currency “price” falls, with inflation.

So my goal is to show how we can create a unified description of both public and private finance. This lets us hone in on the unique advantages or disadvantages of public or private activities.

Pros and Cons of Public vs Private

So the real difference between public and private finance, is not any notional distinction in how funding or accounting works, as each is constrained by the market prices of their financial assets, but rather specific strengths and weaknesses of the public political process versus the private process of investment and delegation.

In general, a private enterprise is going to be more streamlined and direct, because it doesn’t have to respond to political and social outcomes, and it only cares about financial viability and profits. The structure of private enterprise is very hierarchical, resemblent of military where control works in a top down fashion and is designed to achieve specific objectives over anything else. It’s not necessarily efficient as it is singular in its focus and purpose. People claim that private enterprise is efficient only because that singular purpose is financial profits. So it may not be so efficient in terms of the impact on environment, customers, or workers. The efficiency is all about collecting as much money as possible, not necessarily improving the lives of users or consumers, which is why we get sugary drinks and low quality disposable clothing and toys.

The principle weakness of private enterprise is not in terms of execution, but rather direction: “is this a good thing to be doing at all?” If a private enterprise decides to do something, they often can execute very efficiently. If they could not deliver, in most cases, they would not be in business for long. The one exception is when investors are so wealthy and out of touch that the enterprise is not sensitive to typical constraints of market performance.

As Neil Degrasse Tyson has pointed out in numerous talks, most private enterprise is not good at making long term investments where there is no obvious or immediate benefit. I would add to that, that private enterprise often is a victim of its own success. It struggles the most when it is successful and wealth is abundant. It tends to chronically underinvest in essentials, and to overallocate to absurd indulgences, based on not being good at equitable or fair distribution of the wealth it creates.

Public Accounting Is About Universal Representation

In contrast to private enterprise, public accounting is about universal representation.

This creates a unique set of strengths and weaknesses. The political process is about assessing and responding to everyone’s input universally. This is quite difficult to collect and gather, and often even more challenging to fulfill in a satisfactory way.

This is why it makes sense to always try to balance out public and private. If we tried to allow everyone to weigh in on every decision made in an economy, then the process would be extremely costly, and there would be a lot of gridlock in decision making. In many respects the political process is intentionally designed to be inefficient, so that we don’t make sudden dramatic changes that could be destabilizing and destructive. We have two legislative bodies precisely to force them to negotiate and compromise and slow down any rash decisions. When independent branches of government cede their power to the executive, as we see with Trump today, this undermines these checks and balances, and short circuits this political process focused on universal representation.

But at the same time we got to this point because liberalized economics did not represent universal interests effectively, to the point this became a catalyst for Trump and the MAGA movement to gain power. The current destrution and devastation of the Trump regime is the culmination of decades of liberal economics where the average worker was increasingly undermined and powerless.

The Two Most Unique and Contrarian Ideas of MMT

Money as a Monopoly

In MMT measuring the money supply requires looking at all debts on the consolidated federal government’s balance sheet. It is less concerned with measuring the monetary substitutes that arise endogenously such as demand deposits and other credit transactions, except as a short term indicator of credit activity. These endogenous instruments have been traditionally measured as the “money supply” under aggregates such as M1, M2, M3, or even M0. But because private credit, as a “horizontal” transaction, nets to zero, it is not a good indicator of a total amount of money “pumped into” an economy, but rather the extent to which the economy is spontaneously trying to reorganize itself.

The endogenous credit instruments are a good measure of the dynamicism in the economy, in that resources are being shuffled around and ne, but not a direct measure of inflation pressure, or the extent to which money has been over issued and therefore indicating future devaluation.

While their may be a correlation between a dynamic economy and one sensitive to inflation pressure, as a dynamic economy may see more than average failed projects, the endogenous credit created is not the source of inflationary pressure, but rather the government’s net balance sheet position or excess debt.

Interest As a Public Subsidy

The second “most unique” idea of MMT, in my subjective view, is that the fed funds rate and entire yield curve of the bond market, is a way to subsidize capital gains.

Capital is an expression of property rights, government intermediates how and why property rights are granted, including imposing obligations on property owners in the form of taxes, in order to maintain their claim.

A passive capital gain(where the yield is insensitive to who owns the asset or how it is managed), as an automatic expansion of a property claim, is therefore a negative tax. This is especially true for financial yields on public debt. The government is paying you a passive income stream for passively holding a tax credit. Tax credits are used to maintain a private reservation of property, but when you have negative taxes in this way it doubly devalues the tax credit: one by diluting it, and two a negative tax means that people don’t need as many tax credits.

In imposing taxes on property owners, or conversly, by granting subsidies to property owners, directly through bond yields, or indirectly by making passive capital gains possible, by offloading the costs of defense and maintainence of property to the broader public.

In either case, a government is ideally operating as a proxy or representative of the broader public in determining the necessary conditions to be granted or maintain an exclusive private property claim.

For this reason raising the fed funds rate merely subsidizes capital gains, offering more free money and property to those who already hold money and property, and the cost of that increased interest income must be bourne by some other part of the economy: workers, retirees, or foreign countries, otherwise it dilutes and devalues the dollar creating inflation.

For example, with a 100% daily interest rate, you could not continuously double people’s monetary balances every day, and not get proportionally high inflation, unless someone else could pay for that.

So the most important “pay for” question, is “who is gonna pay for higher interest rates, that benefits people with saved money.

At the end of the day, zero interest is not free money, UNLESS, it is granted with a zero downpayment and/or zero collateral, but what is “free money” is sitting back and collecting more and more interest for doing nothing, but just owning property.