L. Randall Wray – Modern Money Theory for Beginners
As tax day approached, St. Francis College Economics Professors launched their first Economics Week with three days of guest speakers, and student research.
Professor L. Randall Wray, professor of economics at Bard College, discussed “Modern Money Theory for Beginners” on April 6, 2018. His current research focuses on providing a critique of orthodox monetary theory and policy, and the development of an alternative approach. He also publishes extensively in the areas of full employment policy and, more generally, fiscal policy. Wray’s most recent book is Why Minsky Matters: An Introduction to the Work of a Maverick Economist (2016).
Professor Wray will also talk about the Levy Economics Institute of Bard College MA and MS Programs in Economic Theory and Policy.
joseba says:
Randall Wray-ren A Must Read: Why does everyone hate MMT?
(http://neweconomicperspectives.org/2019/03/a-must-read-why-does-everyone-hate-mmt.html)
WHY DOES EVERYONE HATE MMT? Groupthink In Economics, by James Montier, March 2019,
(…) he also provides a very useful 400 word summary of MMT. Some of you have asked for a concise statement, and this is as good as you’re likely to find.
1. Money is a creature of the state. Money is effectively an IOU. Anyone can issue money; the trouble is getting it accepted. The ability to impose taxes (or other obligations) makes a country’s ‘money’ valuable.
2. Understanding the monetary environment is vital. The monetary regime under which a country operates matters. Any country that issues debt only in its own currency and has a floating currency can be thought of as being monetarily sovereign. This means it cannot be forced to default on its debt (i.e. the U.S., Japan, and the UK, but not the Eurozone or most emerging markets).
3. An operational description of the monetary system is critical. Understanding that loans create deposits (which in turn create reserves, aka endogenous deposits create loans. For example, knowing that government deficit spending creates reserves and drives down interest rates is vital to understanding Japan’s bond market.
4. Functional finance, not sound finance. Fiscal policy is much more potent than monetary policy. Fiscal policy should be aimed at generating full employment while maintaining low inflation (rather than, say, achieving a balanced budget position). A Job Guarantee scheme is an example of a useful policy option to effect this outcome (acting like a buffer stock in a commodity market) in the eyes of MMT.
5. Limits are real resource and ecological limits. If any sector of the economy pushes it beyond the limits of capacity, then inflation will result. If a government spends too much or taxes too little, it can create inflation, but there is nothing unique about the government sector in this regard. These are the limits that matter – people, machines, factories – not ‘financing’ constraints.
6. Private debt matters. Even in a monetarily sovereign state, private debt matters. The private sector cannot print money to repay its debts. As such, it has the potential to create a systemic vulnerability. Think Minsky’s financial instability hypothesis: stability begets instability.
7. Macro accounting (Godley style) keeps us honest. One sector’s debt is another’s asset. So, the government’s debt is the private sector’s asset. Understanding how one sector relates to another using a sectoral balance framework is very helpful, as is understanding the Kalecki profits equation, or the way reserves work in a financial system. Accounting isn’t glamourous and identities shouldn’t be taken as behaviours, but they can help us spot unsustainable situations.