The Magic Money Tree Exists: https://medium.com/modern-money-matters/the-magic-money-tree-exists-822ee0ecb09a … #MMT
The Magic Money Tree Exists
Isn’t it time we learnt how to use it properly?
The quality of debate in the 2017 UK General election has been generally terrible. The Tories have been trying to push the “There’s no such thing as a Magic Money Tree” line, and falling straight into the “Don’t think of a pink elephant” problem.
This line is known in economic and political circles as The Noble Lie. The Magic Money Tree does exist. They all know it does. When there is a bank to bail out, does anybody ask where the money is coming from? When there is a nuclear missile system that needs building? How about when a foreign nation needs bombing?
Like the elephant in the room The Tree cannot be mentioned, because then the electorate might start asking awkward questions about public services — perhaps we should have some? — and taxation — are we overtaxed for the size of government we have, given that we still have people without work?
Once you know about The Tree you might have your politicians delay a casino build and build a hospital instead. You might let the rich people keep their coins, but stop them using those coins to reserve scarce doctors and teachers for their own purposes ahead of the general population.
The Tories want to privatise everything, and Labour want to hit rich people hard with taxation sticks. There are no doubt reasons for these fetishes that psychologists would find fascinating. But they are damaging to our nation. They get in the way of doing the job.
The debate we should be having is about the size of government we want. And then we instruct our government to provide that. Taxation then is just a thermostat on the wall. You count the bodies in the unemployment queue. If there are too many there is too much taxation and you turn the dial down. If there aren’t any and prices are hotting up, you may have too little taxation so you turn the dial up a little. As Warren Mosler explains in this clip:
Mosler & Kelton on Why MMT Has Not Been Embraced By Those In Power2
Alex Douglas explains in Getting Money out of Politics that the debate is one about resource allocation:
you don’t need to worry about ‘where the money will come from’ to pay for this or that programme or public service. Think about this instead: Are there enough resources to provide the proposed service? Is there enough wood, bricks, glass, PVC, to build new council houses? Is there enough land to build them on? Are there enough builders to build them? If not, are there enough apprenticeships to train them? Are there enough staff in the schools and hospitals? If not, are there enough colleges to train them? If not, are there enough resources to create more of these?
So let’s drop the pretence and get onto the real debate. We know that the last forty years has been about the magic of the market and that government must constrain itself. It must do as it is told by a small number of unelected technocrats sitting in a central bank ivory tower.
The problem is that the magic didn’t work as advertised — unless you were rich and/or a banker. Debating that failure and the alternatives is what politics should be about.
2017 eka. 2
Replying to @neilwilson @ProfSteveKeen
The Noble Lie thing. What are the downsides? Printing money is inflationary?
Warren and Stephanie’s Video explains that:
Mosler & Kelton on Why MMT Has Not Been Embraced By Those In Power
