One of My Best Friends Has a Friend Who Is a Macro-Economist!

So 1 of my oldest friends, who've I known since maybe 1984, & who was my boss from 1986-1995, has a friend who is a macro-economist! Per my friend:

This was his response when I told him I had a friend who was enamored with MMT...

Do an intervention. Tell him/her MMT isn’t modern (the ideas were formed as Abba Lerners Functional Finance of the 1940s), isn’t much of a theory (instead it’s being propounded by hacks on Twitter) and doesn’t have much to do with monetary policy as most of its adherents seem to believe fiscal policy dominates demand which would have Milton Friedman rolling in his grave. To the extent that it does its nothing more than the Argentina / Venezuela model.

My initial response was,

Actually, I usually think of Friedman as burning in hell.

Then I decided I wasn't intimidated by the clip he sent me of his friend being interviewed on CNBC and emailed him this response.

So, there's Descriptive MMT & Prescriptive MMT.

Descriptive MMT basically just admits, all $$$ are created by the Fed, no government with its own sovereign currency ever has to borrow money, they can print the money. Money is a unit of measure, you can't run out of a unit of measure. The thing you really need to worry about is resources. You can run out of them.

Prescriptive MMT is indeed based on Lerners Functional Finance from the 1940s. It is pretty weak tea. It's main (only?) component is JG/ELR - Job Guarantee / Employer of Last Resort, which says the Federal Government should have a jobs program in place, a la WPA, that guarantees employment. It is counter-cyclical with the economy, which is a good thing.

I started studying Economics when I retired in 2012. Very, very discouraging. Basically, it is not a science. Basically, it's mostly crap. Kuznets Curve, which said economic inequality would take care of itself, crap. Phillips Curve, which is a big deal and relates wages, inflation, & unemployment, crap.

Your friend referencing Argentina/Venezuela tells me that he is a monetarist - too much money in circulation creates (hyper)inflation. Also crap. In the very few known instances of hyperinflation, there were horrible, horrible other things going on, too much money did not cause the hyperinflation. Rolling the $$$ presses was indeed unsuccessful in counteracting the other horrible, horrible things.

Descriptive MMT was the 1st economics I read in 8 years where I'm like, "Finally - something that makes sense!"

Here is my lengthy (24k words) review/summary of "Modern Money Theory", 2e, by L. Randall Wray, which I think is kind of the goto. Not a well written book. But give my review/summary a skim.

Keynes & Marx both thought that, around now, capitalism would have done its job & created enough capital that the human race could do whatever it wants, and we could retire capitalism.

Are we there yet? (See my review/summary of "Economics of Arrival", 7.4k words).

My estimate of current global capital, including dark money, is $1000T. Why are interest rates approaching negative? Because the world has pretty much all the capital it needs. The stock market remains the only place you can get any ROI, &, hooray, they now know the Fed will prop them up regardless. Nice how Wall Street buys into MMT! How about the rest of us?

If the Fed were to create $10T in QE "for the rest of us", it would represent an increase of 1% in the world's capital. OMG, HYPERINFLATION! Krugman (who is not an MMT fan :-( ) still mentions how all the conservative economists who predicted hyperinflation after the Fed announced QE in 2009 still insist that they are right?!?!? Not a single 1 has retracted their prediction.