Great Leap Forward

BATTLING THE MASTER BAITERS: In the Trenches for MMT. Troll Friday.

Well, it’s been a long time since we had a Troll Friday. Here’s one.

Pheuuww that was fun! My recent blog on “Debt-Free Money” brought the commentators out of the basement, especially over at Naked Capitalism. At last count there were 438 comments on the blog at NC, of which about 400 were nonsense (at best). OK well not 400 because many were by Lambert, Joe, STF, and a number of others who did their best in the battle against nonsense. And Yves prefaced the piece with a prophetic comment: “Virtually all of the complaints about MMT are based on a failure to understand what it says about how money works.” Thanks to all of them, but really you cannot defeat silliness with reason. A small number of determined masters at baiting (that is, master baiters) can overwhelm a site.

I happened to be reading my AARP magazine (OK go ahead and laugh) and came across this from Dame Helen Mirren on social media: “It reminds me of a stinky old pub. In the corner would be this slightly disgusting old man who sits there all day, every day. If you went up and talked to him you’d get the kind of grumpy, horrible, moldy, old meaningless crap that you read on Twitter.”

Here’s a typical exchange. Note I’ve substituted “Subaru” for “MMT”.

Hi, I’m looking to trade-in my old Chevy Monza. Terrible in the snow.

You came to the right place. All of our Subarus are AWD.

Great. Does it fly?

Well, pretty fast on a level road.

I mean fly. In the air. I want to fly to Tokyo.

Uhhm. No. Have to keep it on the ground.

That Subaru won’t fly? What are you trying to sell me? You are trying to destroy the environment.

But neither does your Chevy; and the Subaru will drive through snow while getting three times the MPG of your old car.

Does it float? I like party boats.

No, the Subaru won’t float, either. Neither does your Chevy. Which is a poorly made piece of junk.

You must be an idiot trying to sell me a car that won’t float or fly. You are an apologist for banksters.

Sorry, I thought you wanted a car.

See, you keep ignoring the real issue.

Oh. What is that?

Interplanetary space travel.

OOOOOKay. Sounds good.

Good? You idiot. It is terrible. Only the rich can afford it. You guys only think of the One Percent.

Well, I mean, when it becomes technologically possible we could have a public transportation system for all.

Zimbabwe! Weimar! You’re always trying to destroy our currency. Just like you did in the 1920s in Germany.

I don’t think there were any Subarus in Germany in the 1920s.

There you go again. All high ivory tower theory, ignoring policy.

OK enough with Subarus. You think I exaggerate? Take a gander.

jgordon July 2, 2014 at 10:16 pm. You all on the MMT bandwagon need to differentiate between your idealized, ivory-tower theories about how monetary systems work to produce (or not produce) good outcomes, and the reality that everything is regarding the distribution of resources is all about power games and politics… Of course it goes without saying that MMT will not in any way avert or mitigate the ecological holocaust that is already under way. Obsessing about MMT is a lot like stopping on the track to worry over a stubbed toe while the train is barreling down on you. This is not the time to be nitpicking details about your preferred method of capitalist ideology. This is the time for an entirely new paradigm.

(Yep, that Subaru won’t get you to Mars.)

BFWR July 2, 2014 at 9:01 pm. Everyone here including MMTers misses the empirical fact of a scarcity ratio of individual incomes and costs/prices that is continuous throughout the productive process/the economy itself. I’m all for profit, I’m all for endogenous money and all for the fact that the economy is inherently unstable not stable, but cost cannot be ignored or abstracted out of the equation…and if, as I propose that the economy is described by the formula: P = I < C/P

(There you go, economics in one easy formula.)

psychohistorian July 3, 2014 at 2:46 am. I read over 300 comments to this posting and not once did I read anyone referring to how MMT relates to privately held wealth….the accumulated kind through inheritance….how can it call itself descriptive of finance when it leaves out the 800 lb gorilla of inherited wealth/money and the power it wields. Until and unless the current power of that wealth is neutered MMT is an academic pipe dream.

(I just wrote a blog on sin taxes and taxing wealth as a sin. This post, however, was about debt-free money, as anyone who had read the title might have noticed.)

Moneta July 3, 2014 at 7:41 am. The thing is that the US consumes 25% of world resource production. To be able to do this they need the military. If they cut the military and transfer the spending power t the general population then the 25% will drop and the general population will realize that despite having more dollars to spend, their purchasing power is still going down. Of course this wold not happen overnight, so in the beginning it might look like it is working.

(Spell check? Let’s see. Debt-free money. Military agression. At least it rhymes? In some language?)

Rosario July 2, 2014 at 10:35 pm My problem with MMT is that it is not a scientific theory yet it operates ideologically in a manner similar to genuine scientific theories. Scientific processes require repeated experimentation with replicated results in a controlled system. Markets do not allow for any of this since they are based on politics and culture, which are not inherently rational and certainly not scientific…. I advocate for a scientific understanding of economy, but MMT does not provide this possibility since its foundation is legalism, not materialism. We take MMT terms as given, but I ask. What is production? What is consumption? What is currency? These are political and legal concepts not materialist concepts. …We cannot continue to pretend we understand something scientifically when it is anything but.

(And so….we shouldn’t try to understand the economy because we cannot run experiments on it?)

Moneta July 3, 2014 at 8:13 am. There is a large number of countries out there that are family or dictator run. Many protected by the US. They don’t care about MMT and the population, they just care about their personal loot.

(Moneta is the champion of non sequiturs!)

Bobbo July 2, 2014 at 9:50 pm. …Just to clarify: I wholeheartedly agree that universal health care should be a top priority. But not by simply throwing more money at the fundamentally flawed system we have now. Not by saying “No worries, the government can never run out of money.” The system itself needs to be restructured from the ground up.

(Would it be better to throw “debt-free money” at health care?)

Moneta July 2, 2014 at 8:05 am Monetary policy morphed into MMT when the US hit a ceiling and needed to increase its level of deception.  For the last 40 years, MMT has been a tool used by neo-liberals to get us into our current predicament. As long as the US consumes more energy that it’s fair global share, deception and corruption will prevail and the country will continue its downward spiral.

(Wow. MMT took over monetary policy 40 years ago? And nice non sequitur!)

James KIng July 2, 2014 at 12:45 pm Let’s look at the coat check girl analogy for a second: What happens if you give the coat check girl your coat and she hands you a ticket. But, instead of owing you back only your coat when you redeem the ticket, the coat check girl has to not only give you your coat but also part of ANOTHER coat. Maybe a button, maybe a sleeve, maybe another whole coat.


nothing but the truth July 2, 2014 at 10:29 pm. you folks are obsessed with money. money is a means to something. MMT is just economists realizing after a hundred years that they did not understand how finance works.

Roland July 2, 2014 at 10:28 pm. “MMT is descriptive of our current system.” That’s what I most dislike about it. At best, a monetary system which promotes unlimited government borrowing power has proven useless for the purpose of improving the general welfare, since the period of deepest government indebtedness has coincided exactly with the impoverishment of the majority.

(Presumably, Roland prefers monetary theory that is NOT descriptive of our current system—which includes all monetary theory that is not MMT? I like the following statement on what economics is all about a bit better. And at least he brings in cars.)

Mike July 2, 2014 at 1:17 pm. Imagine a very large vehicle. One so large that it has 100 wheels and tires. Imagine 90 of the tires are flat. A good portion of the main article is akin to a group of a dozeneconomists gathered around 2 or 3 of the tires that are not flat, claiming that “this vehicle is just fine, these tires we examined are perfect and completely functional!”

kevinearick July 2, 2014 at 3:44 pm. Independence. The vast majority recognize that they are not going to make the cut, to escape the gravity of perception imposed upon them, and so seek out the game that best suits their position, based upon the perception of others, imprisoning themselves to game theory. Before life begins, they have already lost, of their own free will. Locked into a distribution of game players, they seek competitive advantage, with weapons happily supplied by others doing the same. The perception of debt, guilt, is simply the best weapon to grow the ponzi, to exploit natural resources among those incapable of seeing beyond the past. In this game, global family law, a blood knot between enemies and mercenaries, reigns supreme. At the top end of feudalism, marriage contracts are arranged among enemies, who only hate others more than they hate each other and themselves. As you travel down, the civil marriage contract becomes more mercenary in nature; love is contingent, which means that there is no love, just cheap substitutes.

(The next time I want to write about marriage contracts and cheap love substitutes, I’ll refer to this missive.)

JZ July 2, 2014 at 9:05 am. Lol. Wake me when MMT demonstrates how to print oil.

(Done, dude. My new 3-D printer.)

The Dork of Cork July 2, 2014 at 2:21 pm. MMT accepts the notion of a war economy (full employment). It seems to junk the albeit quaint notion that capital was /is apparently used to reduce work !!  One must always ask the simple questions.  Such as who exactly are we working for when the economy is at full employment. Also it accepts the notion that the state must paper over the loss of purchasing power inherent in free banking.  Its therefore the worst of all worlds – its free banking given state sanction. Essentially its a letter of marque given a academic gloss.

(I don’t think the Dork needs translation. This is as crystal clear as a glossy academic marque.)

washunate July 3, 2014 at 11:10 am. Susan, I think you’re misusing double-entry bookkeeping. For example, when we convert coastal wetlands into federally-subsidized real estate development, we certainly destroy habitat and make storms worse and so forth.

(That takes the prize as the best non sequitur.)

docG July 2, 2014 at 9:53 am. I do not find Chomsky amusing. Nothing personal. In fact I actually admire the guy. On the other hand, when it comes to MMT — or the Platinum Coin — or BitCoin. THAT’s amusing. For sure. I always love reading about that stuff, can’t get enough of it. I also love Bernie Madoff for the same reason. Only we’re not hearing too much about him lately, what a shame! Ezra Pound was especially amusing when explaining what money is all about. Gertrude Stein called him the “village explainer.” She too was amused. There is something truly insane about all this explaining explaining explaining, especially when the answer is so obvious. That’s what makes it all so: amusing.

Yep, amusing.

Go ahead. Read the rest.

Oh, and Happy 4th.

26 Responses to “BATTLING THE MASTER BAITERS: In the Trenches for MMT. Troll Friday.”

Ben JohannsonJuly 4th, 2014 at 4:43 pm

There seem to be a number of regular themes in these comments:

1) MMTers are plunderers and war profiteers, because banks and capitalism


3) To save the environment we must return to the neolithic

4) I have no hope for the future and don’t want you having any either

5) MMTers are stupid and can’t see what is so clear to me (that I won’t articulate)

6) I am so intellectually superior I have single-handedly disproved all economics. I won’t tell you how because you don’t deserve to know.

6) No reforms, I want an entirely new system which may or may not use money but has no debt, no profit, no central bank and is permanently stable while immune to all forms of misuse (the details of which I will not articulate)

financialmJuly 5th, 2014 at 2:13 pm

Appreciate your writings and the excellent comments by Joe Firestone and stf. Also an insightful comment by gf. Encouraged me to get Joe's book on fixing the debt and from there Mosler's books on soft currency and the 7 sins.

EzioP1July 5th, 2014 at 2:33 pm

Most probably I did not understand the MMT in its all extend but have some doubt that wolud like your help to understand better. I think every option should be taken into consideration, the MMT as well. As the currency is just a conventional value for in the country commercial business and also for the import an export, should we regulate the quantity of money we put in the country and also evaluate the exchange rate with the foreign currency every time we change the quantity of money we put in circle ? Isn't there the risk for the country operation that beeing the link to the real economy not so strong it may engender risk of financial bubbles ? By the way this seems to me it is the same problem we have to day with the present QEs. For what the exchange rate is concerned isn't there the risk of a swinging up and down of the rate such that puts up a concern for the import and export exchange of goods and also for the issuing of enterprises bonds and country securities ?

KKLoudermilkJuly 5th, 2014 at 3:57 pm

Thanks for writing about this. In 2008 I became interested in money. It’s not so easy for the lay person to understand, specially when starting with very little prior knowledge other than simplistic idea that money is a token for some cumbersome asset that is stored somewhere under lock and key. So when I started trying to read on the topic I was shocked. Then, after your basic concepts are shaken you feel incapable of discriminating between valid and invalid. You read and read and everything remains in the gray zone.
It would be great if someone like yourself would do a series or small book on the money system that a lay person could easily understand. I have a BS in Chemistry and a Masters in Architecture and I’d really like to understand the money system. I bet there are lots of folks in my situation.

L. Randall Wray L. Randall WrayJuly 6th, 2014 at 11:16 am

I don’t think so. This is a small subset of our citizenry–if you go to any blog site and explore comments you will see the nasty comments are written by a handfull trolls who comment over and over and over, usually with some specialization of favorite issues no matter what the blog is about.

L. Randall Wray L. Randall WrayJuly 6th, 2014 at 11:19 am

enzio don’t get too hung up on the quantity of money–that was friedman’s mistake. also don’t over emphasize the exchange rate. sure it matters for tourists. but with a floating rate, your country can afford full employment of all its domestic resources. for most of the population in most countries that is more important. besides if you have a full employment economy, doing the best you can do, that should be good for the exchange rate–not bad for it.

L. Randall Wray L. Randall WrayJuly 6th, 2014 at 11:21 am

you are in luck! i wrote a book for Palgrave, Modern Money Theory, 2012 precisely for you. It is at amazon and also somewhere on this page is a link.

L. Randall Wray L. Randall WrayJuly 6th, 2014 at 11:28 am

OH, and don’t buy the hardback. there is a cheap paperback available from palgrave and amazon.

CezaryWJuly 7th, 2014 at 1:53 pm

Following the rule of tumb that whatever we focus upon we get more and more of stuff like it, I'd like to ask you about MMT future developments. What areas of development do you envision regarding MMT ?

L. Randall Wray L. Randall WrayJuly 7th, 2014 at 5:35 pm

Well there have only been about a half dozen of us working on this more or less full time, maybe another half dozen contributors and some others starting their careers (our students). So the full sum total is approx 20. Compare that with perhaps 20,000 full time PhDs working to promote orthodoxy. There are LOTS OF AREAS that need attention. But I’d suggest a high priority would be to apply MMT to developing nations, especially the poorer ones (ie NOT the Brics because that’s already being done).

Ben JohannsonJuly 7th, 2014 at 11:10 pm

Dr. Wray,

Has work been done focusing on the contradictory nature of policies to promote export surpluses? Can the inflationary effects of such policies be teased out of the data?

L. Randall Wray L. Randall WrayJuly 8th, 2014 at 11:36 am

Ben: not quite sure what you mean. But, sure, exports are supported through domestic austerity. Such policy is necessitated if you peg your currency (since you need foreign exchange or gold). That means you keep your population poor and unemployed, so you will not develop and you will be left behind. It only works for a while. Further, exporters never have any interest in the well-being of the domestic population or economy. Sure, let it all go to hell in a handbasket. They want to sell to foreigners. No policy-makers should be listening to exporters, or any firm that gets a large percent of its sales abroad because their interests run against those of the nation. What they want is for foreigners to do well and to get rich so that they can sell to them. Exporters can be like a domestic “fifth column”, trying to sabotage the domestic economy. It is ironic that many “progressives” want to promote exports.

L. Randall Wray L. Randall WrayJuly 8th, 2014 at 11:42 am

On the inflationary aspects of exports: all else equal, the aggregate mark-up of price over costs (mostly wages) must be set high enough so that the workers who produce output cannot afford to buy it. (Refer to Kalecki equation, or look in Minsky’s Stabilizing an Unstable Economy book for the math.) So, yes, all else equal the price level needs to be higher if you export; if export share is rising, the markup is rising, so aggregate price is rising. So….yes exports are inflationary in the same sense that high investment or high budget deficits or high consumption by capitalists are all inflationary. Note I did say “all else equal” because other factors come into play, including wage suppression that keeps costs down. So, again, domestic austerity is the likely policy that accompanies policy to push exports.

Ben JohannsonJuly 8th, 2014 at 3:49 pm

Dr. Wray,

I think what I’m asking is whether the inflationary pressures of those policies can be isolated. It logically follows that if you reduce the goods and services available for domestic consumption while effectively importing financial assets this would run counter to the strategy of reducing cost pressures. I’m wonder whether this phenomenon is in and of itself sufficient to require additional, perhaps continuous, devaluation of one sort or another.

CezaryWJuly 8th, 2014 at 7:34 pm

So your small group is at least 1000 times more productive than full time ortodoxy PhDs. :-) That's amazing edge.

Any sovereign currency mid-sized economy can help to boost poor country economy in a manner Marshal Plan did for Europe after WWII. The point is to have stabilized state, no wars and poor country government determined to serve public purpose. Then MMT works well IMO.

CezaryWJuly 8th, 2014 at 7:45 pm

As example of Germany and Japan demonstrates net exporter not necessarily have to experience inflationary pressure from net exports. Sure export is a cost but in some cases (mild, slow rise in current account balance) could be beneficiary to domestic production markets as a source of additional domestic demand.

Ceteris paribus principle is exactly the case which is least probable to occur :-) as everything is intertwined in economy. :-) It serves good for educational presentation of relationship with no (or even adverse) value to forecasting.

Prof Wray, i know you are aware of all this stuff but other people are reading the comments, too.

L. Randall Wray L. Randall WrayJuly 9th, 2014 at 12:03 pm

W.Germany annexed E.Germany to repress wages. It was highly successful. Now Germany will export its jobs to keep wage costs down. Exactly what Japan did. Eventually that kills domestic demand and you run up against ever-lower cost producers. As I said, there are countervailing measures to be taken but they are not sustainable. The world is your oyster and it is not big enough to drive a large economy. You need domestic demand and that runs against interests of exporters.

L. Randall Wray L. Randall WrayJuly 9th, 2014 at 12:08 pm

ben: still not sure what you are getting at. Devaluating the currency does favor exporters, but that is not always an option (ie not necessarily a result or controllable–exchange rate determination is not necessarily dominated by trade flows).

CezaryWJuly 9th, 2014 at 12:08 pm

I think this quotation best describes my personal approach to dissemination of any knowledge including MMT, of course. :-) I hope we all see some wisdom inside.

"If you decide to make someone the enemy and you're pushing very hard against them, you don't affect them at all, but you disconnect yourself from the Stream. If someone cheats you, they cannot diminish your experience. They only diminish their experience. You cannot be diminished by someone cheating you unless you get all upset about being cheated and push against them and use that as your excuse to disconnect from the Stream.
— Abraham
Excerpted from the workshop in San Diego, CA on Saturday, July 25th, 1998"

Ben JohannsonJuly 10th, 2014 at 10:20 pm

Let’s assume we’re looking at Germany (and I am constructing this without much background in the area, only an interest). The country has maintained its export surplus through a variety of means, one of which would be the equivalent of an internal devaluation, i.e. stagnating or even declining standards of living for most Germans, at least in terms of incomes.

So by doing this German exports become competitive, but the country is nevertheless in a situation where real goods and services available for domestic consumption must by necessity fall (as they are being sent abroad) while at the same time German firms are importing demand, financial assets, however we want to look at it I suppose.

In this situation, is it possible that Germany’s very success as an exporter, following of course in the wake of that original internal devaluation which helped create the surplus, is itself generating some level of inflationary pressure? Some of the financial assets being brought into the country’s private domestic sector must get spent domestically, I should think.

“Can a country export too much real stuff and import too much demand?”, I think is my question. And can it necessitate further efforts to shore up the surplus?

L. Randall Wray L. Randall WrayJuly 11th, 2014 at 2:59 pm

Ben I think we are on the same page. Yes, no wonder the Bundesbank is terrified of inflation. German workers were willing to bite the bullet for a long time in the interest of integration. But wage suppression can go on only so long. The only part of your comment that I’m not following is this: “Some of the financial assets being brought into the country’s private domestic sector must get spent domestically, I should think.” So it is true that German exporters have claims on the rest of world (ROW); domestic profits are held up by an export surplus. So is it your concern that these might boost domestic spending and increase price pressures? (Note that higher spending would tend to reduce the export surplus–turning that around a bit.)

Ben JohannsonJuly 11th, 2014 at 9:13 pm

Yes, those repatriated profits are part of what I’m asking about, but what has me really curious is the potential rise in domestic consumption resulting from those profits combined with reduced domestic supply.

Maybe Germany can build a million BMWs per year, but thanks to internal devaluation domestic consumer spending can only account for sales of 500,000. The other 500,000 now get exported and paid for with foreign currency (I’m assuming they’re all sold outside the eurozone) which would eventually be returned to Germany as profits in euros. Now the shareholders who receive those profits in the form of dividends decide they want to buy BMWs, but there’s no extra capacity because so many were sold to foreigners. Hypothetically that sort of thing would be the worst of all worlds: stagnant wages combined with price inflation would leave just about everybody worse off, unless a more-or-less continuous series of devaluations became permanent policy.

I understand that there is a huge difference between an example in my head and the complexity of what’s going on in the real economy, but is it a reasonable possibility that this repatriation of profits can have a magnified effect on price given Germany is exporting a lot of the goods and services those euros would be used to buy, and could this create enough pressure for an export-minded group of leaders to more and more tightly suppress standards of living at home?

Even with no foreign competition could they end up racing themselves to the bottom?

Erick BorlingJuly 18th, 2014 at 8:37 pm

The zany comments cited in your article Dr. Wray, illustrate dishonesty by those commenters. Honesty means “I know that I don’t know” (some things). And they clearly don’t know even that their comments telegraph an incapacity for systematic thinking.

Thank you for the fun article. I understand basic MMT as far as sovereign money creation and how money is a man-made thing whose uses and distribution determine employment / unemployment, but get very confused by Fed / Treasury relationship even after reading most or all of your online MMT basics. Apparently I am in the same intellectual tier as folks like Geithner, Robert Reich, and “all the other economists” (as the trolls say to smite you), but I have honesty going for me.

I am not seeing much enlightened journalism about the recent Argentina situation; which strikes me as absurd partly because The US Supreme Court is arrogant enough to believe it is an international court. But my real question to you is to kindly publish a piece about what Argentina owes — why would a nation borrow “paper” from other nations; and why oh why can’t a sovereign nation pay int’l creditors with Argentinian pesos.

L. Randall Wray L. Randall WrayJuly 19th, 2014 at 11:05 am

ERICK: I’m neither a lawyer nor a judge. I think that one of the perogatives of a sovereign is the ability to redenominate debts, and even to default on debts. This has been done thousands or tens of thousands of times throughout history. Any creditor who believed Argentina would forever and always make all promised dollar payments was a fool, and deserves to lose. Argentina should offer to pay down all dollar debts in pesos; and it should by all rights be allowed to use gunboats to take back its property from hedge funds. But again, I’m no lawyer.