(https://www.facebook.com/groups/introductiontommt/permalink/2570487109916846/)
1slig2 cngdet eenedeSuro gdaap laohmcsunssSao rem1d4:0dg9
Here is L. Randall Wray’s full statement from yesterday’s Radix talk in London.
(…)
Here’s the full video of the London event. with thanks to Kelly Patrick Gerling: https://www.facebook.com/441236456271631/videos/3533745603408459
– – –
MMT in the age of Pandemics, by L. Randall Wray
MMT provides a framework to analyze fiscal and monetary policy space available to national governments with sovereign currencies.
There are four requirements that identify a sovereign currency: the national government:
a) chooses a money of account;
b) imposes obligations (taxes, fees, fines, tribute, tithes) in the money of account;
c) issues a currency that it accepts in payment; and
d) if the National government issues other obligations, these are also payable in the nation’s own currency.
If follows that if a country adopts a gold standard or currency board, or dollarizes, it is committed to delivering what it pegs to. That can reduce policy space.
What difference does a sovereign currency make? The sovereign currency issuer:
i) does not face a “budget constraint” (as conventionally defined);
ii) cannot “run out of money”;
iii) can always meet its obligations by paying in its own currency;
iv) can set the interest rate on any obligations it issues.
Before coronavirus, our critics claimed we were calling on the Fed to drop helicopter money and cause hyperinflation. MMT was “crazy talk” and leaders around the world swore they would never adopt it.
By March, everyone was arguing the Fed should fly helicopters, and drop trillions1 of dollars into the economy. It’s hilarious, but we’ve never advocated argued that the Fed should print up dollars to pay for fiscal stimulus.
So while we are glad that MMT is in the news, what we actually say is that procedures adopted by the treasury, the central bank, and private banks over the past century already allow government to spend up to the approved budget. No change of procedures is required. No money printing, no helicopter drops. Just pass the budget and authorize the spending. The Treasury and Central Bank know how to do it.
What we emphasize is that sovereign governments face resource constraints, not financial constraints. Too much spending—whether by government or by the private sector—can cause inflation. It might even affect exchange rates. But we aren’t going to run out of money to finance the spending.
Before we documented how sovereign government really spends, no academic economist had any idea.
In the old days, governments just notched tally sticks, minted coins, or printed paper money when they spent, then collected them in redemption taxes and burned or melted down all the revenue.
Revenue means “return to”—the government’s currency is returned so that it can be burned.
Today all modern governments use central banks to make and receive payments through private banks. That adds two confusing degrees of separation between government and citizens making it seem that government must tax first, then spend.
In reality, sovereign government must spend first, then tax. Government spending takes the form of a credit by the central bank to a private bank’s reserves, and a credit by the private bank to the recipient’s bank deposit. All tax payments reverse that—with a debit to bank reserves and a debit to the taxpayer’s account. Those debits are the modern equivalent to burning the revenue.
You can’t burn revenue you did not first spend (or lend).
Central banks and treasuries cooperate to ensure this works smoothly. Modern procedures also involve bond sales (whether or not the budget ends up in deficit at the end of the year) through dealer banks that must place bids. The system works; Treasury checks never bounce.
Good budgeting is consistent with national priorities as expressed by the will of elected representatives. The US Congress mandates that policy should be directed to achieve high employment, moderate inflation, and reasonable economic growth.
There is a growing consensus that policy ought to promote greater equality and many are now pushing for policy to tackle climate change as well as the pandemic. These are worthy goals, too.
MMT is not alone in recognizing that austere fiscal policy over the past few decades has led to substandard growth, higher unemployment, and rising inequality—in the US and abroad.
What does MMT add to the discussion about budgeting? Budgeting should be functional rather than constrained by some preconceived idea of a proper ratio between spending and taxing, or of prudent deficit and debt ratios. What matters is resource availability, not finance. If resources are available and government can use them in the public interest, government ought to put them to use.
But what about deficits and debt? Doesn’t ability to borrow limit government’s access to finance?
No. A sovereign government never needs to borrow its own currency. Bond sales by a sovereign government are not really a borrowing operation—rather they offer a higher interest earning substitute for central bank reserves.
Government can make all payments as they come due. Bond vigilantes cannot force default. While their portfolio preferences could affect interest rates and exchange rates, the central bank’s interest rate target is the most important determinant of the entire structure of bond rates.
In truth, the only bond vigilante we face is the central bank. And in recent years the major central banks have promised to keep rates low far into the future.
Finally, even if the central bank abandons low rates, the Treasury can “afford” to make all payments on debt as they come due, no matter how high the central bank pushes rates. Affordability is not the problem. The issue is the desirability of making big interest payments to bond holders.
In extraordinary times, such as this era of a global pandemic and climate catastrophe, government may need to move resources from private use to public use. Since finance is not an issue for government, it can always win a bidding war—but at the cost of setting off inflation.
MMT helps to shift the debate away from “can we afford it?” to a discussion of resource mobilization to save the planet while developing a truly universal health care system that serves everyone in this age of pandemics.
Ask not how to pay for it. But rather, what is the inflation potential of policy. We already have the procedures in place to “pay for” the resources needed; all we need is to find idle resources, create new ones, or shift employed resources to meet these new goals.
——————————————————–
UPCOMING EVENT:
Tokyo Keizai University 120 Year Anniversary Symposium: Modern Monetary Theory and the Corona Crisis
The Corona Crisis came at a time when there was persistent stagnation in Japan. What role should the government play in overcoming anxiety and creating a prosperous future? Will the government face budget constraints? We welcome the leaders of Modern Monetary Theory and the modern Japanese economy, and look into the present and future of the Japanese economy.
This is the URL for English speakers. When the program starts, the viewing screen appears in this page: https://channel.nikkei.co.jp/e/mmttheory_en
Date : Friday, January 22, 2021.
Japan Time Friday Evening 17:30 – 21:00 JST (JST = UTC +9)
America Time: Early Friday Morning California 12:30 AM – 4:00 AM; Colorado 1:30 AM – 5:00 AM; Kansas City 2:30 AM – 6: AM; New York 3:30 AM – 7:00 AM
Venue : Online via NIKKEI CHANNEL
Japanese stream : https://channel.nikkei.co.jp/e/mmttheory
English stream : https://channel.nikkei.co.jp/e/mmttheory_en
Language: Japanese/English (simultaneous interpretation provided)
Fee : Free
Host : Department of Economics, Tokyo Keizai University and NIKKEI.
PROGRAM
-17:30-17:45 Opening remarks: Hideo Okamoto, President of Tokyo Keizai University
-17:45-18:25 Keynote Speech “Has Japan Been Following Modern Money Theory Without Recognizing It? Yes. And No.”, Economist / Professor at Bard College and Senior Researcher, Levy Institute of Economics Prof. L. Randall Wray
-18:25-18:55 Lecture ① “Asset preference and long-term recession”: Professor Emeritus, Institute of Social and Economic Research, Osaka University Yoshiyasu Ono
-18:55-19:25 Lecture ② “Pragmatism and MMT”: Critic Takeshi Nakano
-19:35-20:20 Expert comments on modern monetary theory:
– “Government Debt and Financial System-Market Perspective”: Yasuo Goto, Professor, Faculty of Social Innovation, Seijo University
– “Japan requires a policy of’MMT + α'”: Credit Saison Senior Researcher / Economic Commentator Hara Shimakura
– “About the possibility of MMT”: Atsuyuki Naito, Professor, Ohtsuki Junior College
– 20:25-21:00 Panel discussion
– Economist / Professor at Bard College and Senior Researcher, Levy Institute of Economics Prof. L. Randall Wray
– Professor Emeritus, Institute of Social and Economic Research, Osaka University Yoshiyasu Ono
– Critic Takeshi Nakano
– Facilitator: Hideo Okamoto, President of Tokyo Keizai University
*Please note that the program and lecture contents are subject to change without notice.
Event Site In Japanese: https://events.nikkei.co.jp/32934
– – –
PREVIOUS EVENT:
(This is the event from which Dr. Wray’s notes, at the top of this post, come from.)
Topic: Will we really need to increase taxes to pay off Covid debts?
Description:
The coronavirus crisis has caused a large increase in government debts in most countries. To what extent do governments have to increase taxes to repay these debts? Modern Monetary Theory (MMT) is an emergent, and increasingly influential, school of economic thought which argues that governments can create money and therefore they are not constrained in their spending. More mainstream economists, including the IMF, are advocating large scale public investments to boost growth rather than fiscal prudence. We are delighted to host Prof. L. Randall Wray, a leading exponent of MMT in conversation with Paul De Grauwe, and hosted by Baroness Patience Wheatcroft to discuss whether countries do indeed need to increase taxes to pay for it’s increased debt, and what are the alternatives.
Time: Jan 11, 2021 05:00 PM in London
1 Amerikar trilioi bat = europar bilioi bat.
