Socialist here - What do libertarians have to say about Modern Monetary Theory (MMT)?
I'll start by saying MMT is not strictly ideological- it's possible to have a very wide range of views on the role of government in society while accepting MMT analysis of what money is. For example, it's possible to want lower taxes while accepting MMT. Most MMT economists argue against any corporate tax because such a tax fundamentally misunderstands the actual function of taxes. Tax cuts also reduce the drain of net financial assets from the private sector (according to the MMT sectoral identities) and boosts aggregate demand. Many MMT economists also take a libertarian-like position on trade and are vehemently anti-tariff. Further, many socialists utterly despise MMT. Many believe it displaces the primacy of class struggle and/or somehow undermines Marx's LTV. Doug Henwood published a lengthy (and IMO very poor) critique of MMT in the socialist mag Jacobin. It seems to me that MMT is just fundamentally true no matter which way you look at it. For those unfamiliar, here are some basics:
Money is debt (or credit). Money denominated in a country's unit of account is that country's debt. In the US, that debt takes the form of FRNs (Federal Reserve Notes; dollar bills), coins issued by the Treasury, and reserves held at Fed. Money is an IOU (I Owe You). Dollars are an IOU because the government issues the dollar saying "I owe you $1 of tax credit". The IOU is redeemed when taxes are paid.
Most money circulating in the economy takes the form of demand deposits which are created by banks making loans. Deposits are liabilities of banks whereas loans are assets. Deposits are redeemable for government debt: FRNs (cash), coins, or reserves (transaction clearing, tax payment).
The government must spend before it can tax. It cannot redeem its IOUs until it has issued them. This means government spending is not revenue constrained and is theoretically unlimited. The actual constraints on government spending are the real resources and labor available in the economy as well as other concerns like inflation.
The role of taxes is to create demand for currency by getting people to accept the government's IOUs. For example, the state may level a tax of $10 per household per annum. Now people need dollars to meet their tax liability or face punitive measures from the state. Therefore, people will accept government IOUs (dollars) in exchange for resources and labor. In the modern economy, this is less apparent and nobody actually thinks about wanting dollars in order to pay taxes. Dollars now seem to operate much more like commodities. But this is how currencies get off the ground.
Taxes destroy money. The government has no use for its own IOUs because it can create as many as it wants. Taxes effectively drain IOUs from the non-governmental sector.
I'm not going to give a full exposition of MMT here as there are many resources available for free online. The historical record of fiat currency and analysis of Fed/Treasury operations overwhelmingly seems to support the MMT view. My main question is what the libertarian perspective on MMT is. I definitely see space for agreement but there is also tension with neoclassical/Austrian thought. In my experience, libertarians tend to take the 'commodity' view of money (hence preference for bitcoin, gold) which is roundly rejected by MMT. Austrian views on public debt and the nature of interest rates are also at odds with MMT because of this fundamentally different understanding of money's ontology. Anyway, please leave your thoughts. Not trying to start a flame war. Looking for actual discussion. EDIT: If you're going to respond, please at least expand on your thinking. Saying "it's bad" is not really helpful.
I just listened to an interview with my main man, Yanis Varoufakis, and this was the first I heard of DiEM25, a movement to democratize the EU. Basically, an international group has rallied around a shared platform and will run in their local elections based on said manifesto. It sounds less socdem to me because of its international nature, and I personally get excited when people have the vision and energy to collaborate on manifestos. But, it's still electoral politics, attempting to maneuver within bourgeois systems...there will always be a limit to what they can accomplish. That said, I have a lot of respect for Varoufakis, so I'm curious what our European comrades think of this initiative. (The interview was the recent Behind The News with Doug Henwood. Also had an interesting segment about bitcoin, but I can't find a link at the moment, sorry!)
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