Randall Wray 2019an, DTM-ri buruzko lan batzuk





Everyone knows by now how MMT began—it grew out of an early 1990s PKT online discussion group. That is where Bill, Warren, Mat (Forstater) and I met. We took our discussion offline because most of the other participants could not understand what we were talking about or were hostile to it. Mat and I tried to set up a center at the University of Denver, but the Dean nixed it. We started CFEPS at Levy but moved it to UMKC in 1999 because it had a pre-existing pluralistic and interdisciplinary PHD program—and because we wanted graduate students, for reasons I’ll discuss in a minute. Pavlina had been Mat’s student, and then helped Warren to put together the first “manifesto” (if you want to call it that) on MMT—called “soft currency economics” at the time. Pavlina also helped Warren to organize the very first MMT conference at Bretton Woods in 1996. I attended, as did Charles Goodhart (UK, Bank of England) and Basil Moore (Post Keynesian “horizontalist” endogenous money). Warren also helped to finance time off from teaching for me to write the first academic book on MMT—titled Understanding Modern Money, 1998. The title came from Keynes, and according to tradition, the term MMT itself came a comment on BillyBlog. Bill had created Coffee at about the same time that we created CFEPS; he then later created his blog and Stephanie followed with the NEP blog. In 2007 Bill and I began to write the MMT textbook, which was finally published in 2019—Martin joined us a couple of years ago and without his help the publication likely would have been sometime around 2029. (…)

Warren Mosler | October 7, 2019

I like the Vonnegut ending ? Also, Pavlina worked with me several years after soft currency economics had been completed.
Good stuff thanks!




In this Part 2 I discuss a special issue of real-world economics review devoted to MMT (http://www.paecon.net/PAEReview/issue89/whole89.pdf).


… I will note here that I use the terminology Modern Money Theory—and have seen that usage as following on from the title of my 1998 book (Understanding Modern Money). We also used this terminology in our textbook. However, many of my colleagues had used the other terminology Modern Monetary Theory. I object to that as it draws attention to the word “monetary” and leads many to believe it is all about monetary policy—while in reality much of the focus is on fiscal policy …


… where I learned how to do the accounting and which made it possible for me to immediately understand Warren Mosler’s comment that “bond sales are just a reserve drain, not a borrowing operation”. (…)

Strangely, Warren Mosler’s contribution has been excluded from almost all of the critiques (…). Warren is clearly the “father” of MMT, and he writes precisely and concisely. It is like criticizing Marxism without reading and citing Marx; or Keynesianism without reading or citing Keynes (…)

… when I wrote Understanding Modern Money, 1998, I was reluctant to discuss exchange rate regimes (although Warren pushed me to do so—and Warren has always made clear that when he talks about “soft currency economics” he is not including nations that don’t have their own sovereign currency). (…) Mat Forstater is a development economist and he brought that background into his work from the very beginning; and Bill lives in a tiny little open economy and so he always had the international scope in mind. And in Part 1, I directed those who are interested in the application of MMT to developing nations to the video from the conference panel on the topic.




In this part, I’ll resume with comments on the critical contributions to the special issue of rwer. (…) Let me return to the oversight of contributions made by scholars such as Fullwiler and Tymoigne—who have mostly written academic pieces.

… The initial finance of government spending is created when the spending occurs, and today takes the form of two balance sheet credits: the deposit account of the recipient and the reserve account of the recipient’s bank. (…) Eric Tymoigne made exactly this point in a 2014 article, arguing: “Put in terms of the circuit approach, taxes and bond offerings are part of final finance (funding).”…

… why should the government care what form the nongovernment sector holds its net financial assets in? If they want bonds, give them bonds; if they want reserves, give them reserves; if they want cash, give them cash. In any case, portfolio preferences affect interest rates, not the government’s ability to finance or fund its spending. The spending comes first and should be seen as creating the finance as well as the funding (using his terms).


… in our Constitution—which gives to Congress the sole power to issue currency. Throughout history and around the world today most governments choose the money of account (the measuring unit in which debts and credits—whether or not they are government’s or someone else’s—are denominated), issue a currency denominated in that unit, and accept back currency in payments made to itself. That sounds pretty special to me. But it doesn’t erode endogenous money—it provides the foundation for it.

… on to a hoped-for-future in which AOC becomes the Democratic Socialists of America’s first President of the USA. Trust is nice but it doesn’t explain much of the history of money or of government—unless you are referring to the trust that the authorities who imposed monetary tax obligations will enforce that obligation with substantial penalties for nonpayment. …

MMT emphasizes the role of trust in the issuer of the currency instead of the role of trust among users of it (…) What is the nature of that trust? Obligations to pay taxes—and many other contracts—will be enforced in the money of account, with the currency (cash as well as reserve deposits at the central bank) the ultimate means of settlement.

(…) what we are actually arguing is that sovereign government alone does not face a financial constraint. At the aggregate level, the private sector doesn’t really face a financial constraint, either, since spending determines income. However, at the level of each entity, there is a financial constraint. And since the capitalist economy suffers from the “anarchy of production” (it is not centrally planned), it is up to the government to act as the stabilizing force. Finally—and related to this point—the sovereign currency issuer has a special role to play as both spender and lender of “last resort”, as well as taxer of “first resort” that can put a crimp in paychecks.

We are well aware that causation is complex—the activities of the private sector impact spending and thus income and thus tax revenue. Government spending is also affected by private sector behavior; for example, some social spending is triggered by economic performance as well as by means testing and other legislated triggers. Hence, the outcome of the government’s budget is “endogenous”—we emphasize that government cannot really decide independently to run a surplus, balance, or deficit. However, it can decide to spend more or spend less on specific programs; and it can decide to increase or reduce tax rates on specific activities. But the end-of-period impact on the outcome of the government’s budget is not determined by that behavior.

Our point is just the usual Keynesian idea that government can lean against the wind. And following Godley we emphasize that the size of the deficit will always be “just right” to offset the sum of the domestic private sector plus foreign sector balances.

But sovereign government still has a very big impact over the level of economic activity at which those balances balance. And sovereign government can always maintain full employment of labor resources, as usually, defined through a Job Guarantee. If the program pays $15 per hour, making jobs universally available at that wage, then anyone who remains without a job is not involuntarily unemployed. While there could be very good reasons for them to refuse to accept the JG job offer, and while we might even want to develop policies to bring them into employment, the JG represents the minimum level of responsibility that a sovereign government ought to take to ensure a universal right to a job.  We argue that this is a far better goal than pursuit of some arbitrary deficit or debt ratio. We also prefer this over a GDP growth target. However, clearly, full employment is not the only legitimate goal of good government.(…)


(Hurrengo sarrera batean ikusiko dugu)

(iii) Fiscal Reform to Benefit State and Local Governments: The Modern Money Theory Approach


This paper will present the Modern Money Theory approach to government finance. In short, a national government that chooses its own money of account, imposes a tax in that money of account, and issues currency in that money of account cannot face a financial constraint. It can make all payments as they come due. It cannot be forced into insolvency. While this was well understood in the early postwar period, it was gradually “forgotten” as the neoclassical theory of the household budget constraint was applied to government finance. Matters were made worse by the development of “generational accounting” that calculated hundreds of trillions of dollars of government red ink through eternity due to “entitlements.” As austerity measures were increasingly adopted at the national level, fiscal responsibility was shifted to state and local governments through “devolution.” A “stakeholder” approach to government finance helped fuel white flight to suburbs and produced “doughnut holes” in the cities. To reverse these trends, we need to redevelop our understanding of the fiscal space open to the currency issuer—expanding its responsibility not only for national social spending but also for helping to fund state and local government spending. This is no longer just an academic debate, given the challenges posed by climate change, growing inequality, secular stagnation, and the rise of Trumpism.

(iv) Alternative paths to modern money theory

Wray, L. Randall (2019) “Alternative paths to modern money theory.” real-world economics review, issue no. 89, 1 October, pp. 5-22, http://www.paecon.net/PAEReview/issue89/Wray89.pdf

In recent months anybody who is anybody has had to weigh in on MMT. From Fed Chairman Jerome Powell (who admitted he has never read anything on the topic but claimed MMT is “just wrong”), to Carl Icahn (who phoned me during the 2016 presidential campaign to enthusiastically discuss similarities to his own way of thinking but now calls it “very dangerous”), to Japan’s Finance Minister Taro Aso (who called MMT “an extreme idea and dangerous as it would weaken fiscal discipline” – as if Japan’s fiscal discipline is a wonder to behold), to leftist Jerry Epstein (who calls it an “America First” ideology with “centralized controls” rather than relying on “more market friendly policies”), all are united in opposition to the theory. What all have in common is that what they critique has nothing to do with MMT. I am not going to devote space to countering their fallacious arguments here, but instead refer readers to several rejoinders.

(Links to the critiques and rejoinders can be found here: Wray 2019a, Wray 2019b, Wray 2019c, Wray 2019d, Wray 2019e, Mitchell 2019a, Mitchell 2019b, Mitchell 2019c).

What I will do is to first clearly state what MMT is and then outline four paths that lead to MMT’s conclusions: history, logic, theory and practice.

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