Modern monetary theory (MMT)

I just learned about „modern monetary theory“ (MMT) and I get the impression, that this theory integrates a lot of ideas and facts regarding some of the developmental lines of the lower right quadrant (PESTEL). This theory seems to foster a further developmental step.
Any opinions here?

Hello, Michael. It’s actually somewhat disappointing that in more than six months there have been no replies to your post on MMT. For my part, I think it’s certainly a move away from the mythological underpinnings of monetary theory in the direction of theoretical understanding derived from empirical observation. Perhaps the dismal science will become science after all. Have you had occasion to read David Graeber’s “Debt: The First 5000 Years”? I found the book interesting, not the least because of his noting that the “story” of the development of money as promulgated by economists cannot be found in the real world (historical or current) by anthropologists, as well as his observation that when that fact is brought to the attention of economists they continue to repeat the dogma (for their own purposes).

I’ve studied some in economics, but I’m far from “educated” on the topic. I can see real value in MMT. I also, perhaps for no other reason than my ignorance, really can’t fathom how controlling for inflation can be accomplished in real time through taxation. In an adversarial by design governmental system easily influenced by anyone with money and the will to spend it I worry that having the tax cut vs tax increase and for whom argument over and over again would only confirm Adam Smith’s observation that in matters of law and money, those with the money will make the law. But then …

Anyway, this is my first post since the early days of Integral Naked. I hope that more of the very bright folks in the Integral community will look into MMT. It does seem like a defensible view on understanding monetary policy. May I guess that you have visited the New Economic Perspectives blog and don’t need my tip in that direction?

Hello J Michael, thank you for your reply.

Yes, a major r-evolutionary step is occuring, and nobody seems to notice here, but you do! :slight_smile:
I have to say, until six month ago, I was a stark defender of austeritiy and I was an unconscious subscriber to the neoliberal mindset – free market, power to the individual, the state is the problem, laissez faire … and I had a hard time reconfiguring myself. (Structural change is really a change!) But now, after so many books, videos and discussions, it seems clear to me that we are witnessing one of the most significant cultural movements since Karl Marx – the introduction of the lower quadrants into the picture of macroeconomic, whereas neo-liberalism emphasizes the upper quadrants, the individual. This is amazing, and we do now know more than Marx could know, so we have a better chance to avoid collective absolutism. And, as Ken Wilber writes in one of the excerpt, the influence of the lower right quadrants – and macroeconomics – on the other quadrants is huge.

So many myths are now adressed and can be replaced, what a relief.
You mention the tax problem – will it ever be possible anywhere to tax the rich? The good news with MMT is – you don’t need taxes to finance government spending, that is a myth. A government with a sovereign currency can finance and provision itself by creationg money. But does this not lead automatically to inflation? No, that is a myth too. If there are idle ressources available, that can be brought into production, there will be no or only little inflation. This has been proven in history, when the US government was financing WW II, or when the FED did a huge bank-bailout by „keytrokes“ during the financial crisis. But if there is inflation, yes, you need taxes. But these taxes don’t come from a greedy government to discipline the rich, they are helping to curtail inflation.
And yes, „money makes the world go round“, but with MMT, it is not only private or corporate money any more, it is also the money of the state, as the only issuer of currency. This is money for all, and not only for the few (hopefully).

But it is hard, the mainstream is firing back, and not very nice :slight_smile:

Two weeks ago there was a hearing in Congress on the federal budget. Three of four experts were - more or less – neoliberal, and one was MMT (Randall Wray). Its is on the internet, and watching the hearing, I could feel the tension between the old and the new, spirit in action, transcend and include, a real battle. Amongst other things, politicians heard – maybe for the first time – about the sectoral balance. If you run trade deficits with the rest of the world, as the US does, and if you insist on a balanced federal budget, somebody has to pay for the trade deficit, down to the penny, and the only remaining sector is the private sector – they lose money. OK, they get the goods from all over the world, but when the savings are gone, there will be a recession …

Anyway, evolution takes its own ways, to our surprise. I communicated towards MMT the importance of „integral“, and I am glad to do this here with regard to MMT. I believe that integral and MMT fit well together, and can learn a lot from each other.

Thank you again, J Michael, I did read David Graeber’s wonderful book and I like the „New Economic Perspectives Blog“.



Just to clarify … I didn’t specify taxing the rich, but only that I don’t see a way (restating) for a system wherein a congress beholden at worst and influenced at best by the wealthy can effectively levy taxes in a timely manner for the controlling of inflation. On the other hand, the books are balanced at the end of every day in our banking system, so again, perhaps it is only my ignorance that muddies the waters of my perception.

The Federal Budget, of course, is not balanced, although it is perpetually argued by some that it should be. If I understand MMT correctly, it would be a disaster if congress was successful in forcing the budget into balance. If your system requires growth, removing the debt chokes economic activity and the reduced money supply kills the investment that produces the growth, yes?

I think that one of the most important points in MMT is that the Federal Deficit that scares everyone witless is nothing so much as a measure of the money in circulation. If I understand correctly, it is largely irrelevant in economic terms: if we need more money in circulation we issue bonds; if we need less we tax it back. So we have to pay the interest on the bonds, yes, but since we have a sovereign currency we can never default on the debt, it is moderated on the international market, and if all else fails, we will be forced to devalue our currency. Obviously that would annoy our creditors, those who hold the afore-mentioned bonds, but if Argentina can pull that off without being invaded I don’t think the US has much of a worry in that regard. MMT doesn’t replace Capitalism, so we depend on growth to cover the difference, just as we do today.

Thanks for the tip to Randall Wray with the orthodox economists. I haven’t seen it, but I’m definitely looking forward to it.

J. Michael, wonderful.

This just came out. Stephanie Kelton.’s-take-on-fiscal-policy?autoStart=true&fbclid=IwAR1ZyofI73UVwaVhuDbw1f-2uBHBBiMwfBuSnXjN12OurxR9ezTxjzmcVLI

I don’t see any reason to take MMT seriously.

Oh, this is like saying „zero top intellectuals have agreed with integral theory, so it must be wrong”. You have to find out yourself in both cases. US top economics also announced a “great moderation” (Bernanke) where the ups and downs of economy where mastered forever, just before the great financial crisis.

I’m an academic and I checked with many of my academic friends regarding MMT. They don’t seem to take it that seriously but a couple of them did argue that the era of neoliberalism and Reagan era supply side economics is coming to an end. The evidence is this: extremely low interest rates and no inflation with companies inflating their stock prices by stock buybacks (and taking on debt even with trillions of cash at hand). Meanwhile about 44% of Americans in the age group 18-64 make less than 20K a year. These are indicators of something seriously amiss: we have an increasingly more unequal economy with companies sitting on cash and not investing in a supply side era!

After the next recession (whenever that is), we’ll face two problems at once: climate change requiring perhaps 30 trillion USD investment by the planet, rampant income inequality while countries have tremendous amounts of debt. Undoubtedly MMT or something like it will be considered at that time (as an alternative to sky high tax rates). Most of my business school friends agree that fundamental change is ahead - but no one knows what shape it will take, hence the lack of agreement that MMT is the alternative to neoliberalism.

Thank you, Anand. I would like to add a distinction here, with paralles to integral. MMT itself is just a “decription of existing monetary operations”, which provides insights into the fiscal space a currency-sovereign government has, among other insights. MMT is (or could be) for the monetary system what AQAL is (or could be) for the manifest world. Whether you „consider“ this or not, it is already „operating“, like the IOS for integral. People then are assigning (political) agendas to AQAL or MMT, and that is fine, but it is a different thing, and of course a matter of debate and agreement. These agendas may be conservative or progressive or integral (“integral social justice”). But to get the rubber on the road, they need an accurate „map of reality“ behind or underneath. This is what AQAL and MMT try to be for their areas. With regard to MMT, politicians from both sides know these things (but they keep telling people that „tax revenue must come before spending“). They know that this is not true. The deficit spending of Donald Trump makes it very clear. He does not wait for more taxes to finance his agenda, instead he reduces taxes. He gets his budget through congress and the FED provides the state with the requested money by „keystrokes“, as already existing monetary operations.
So the questions for both AQAL and MMT are IMO:
a) how good are these maps representing reality? (And to that extend they are already operating)
b) what do we do with them (which policy shall we apply)?

That’s an interesting analogy, thanks!

Let me offer my own analogy based on this. Just as many academic philosophers will not take Integral Theory as anything fundamentally new since to them it looks like a souped up dual-aspect theory (going back to Spinoza), there are going to be many economists who will not accept MMT as a modern map of money especially since we’re in a weird era where the US can take on incredible amounts of debt, have deficits of 1T when the unemployment rate is 3.6% and still have inflation under 2%. This clearly points to a high level of inequality where a large part of the population simply does not have enough money to spend. So, MMT might be biased by the times just as Integral Theory may not want to look closely at its dual-aspect basis.