MMT is a fringe economics theory mostly about money supply and government debt. They foolishly believe that debt is a good thing (and it doesn't matter because government can print all the money they like.) They also contend that taxes are not for government revenue, but there to balance their monetary policy. They contend that is how things really work. If it is (highly doubtful), the system is a lot more messed up, irredeemingly so, than i ever thought possible.
So why don't i like it, beyond it being absolutely ridiculous? The whole thing sounds like it existed with various policy goals in mind. Whether it is UBI, Medicare for All, the Climate Change scam, or any number of other policies drastically growing the government. Basically a "blank check" for government spending. Wishful liberal thinking divorced from reality. MMT, like unfettered immigration (and other liberal programs if implemented), would be a ticking time bomb.
If any nation is $1 Trillion or more in debt, the government has failed the nation (or sold it out). Government spending is parasitic and should never have been considered part of GDP.
Just a few points i could think of at the time, there are more...
The FOMC likely has caused more pain than it has prevented (to the extent it actually could have "prevented" anything). Their stated (partially contradictory) goals are limiting inflation and a base level of employment. Both of these should be decided purely by market forces, not manipulated by an entity far more political than they will ever let on. Any human policy overreactions can have severe consequences.
1) Their underlying assumptions about the role and scope of government are deeply flawed. Hint: the government does not exist to be a welfare state.
2) Debt is not a good thing. Debt compounds and spirals. Also, unintended consequences, like crowding out private investment. Debt is a future tax on the purchasing power of the currency, as it undermines the store of value component that is definitionally present in all currencies. Debt capacity is limited, getting closer to the limit makes things far more expensive.
The only ways modern government can pay off debt are by monetizing it (devaluing currency) or replacing it with more debt. Let's pay off the Visa with the Master Card type thinking.
3) One of the questions that frequently come up is "why do i have to pay taxes if the government can print its own money". They pretend that taxes have some different role than straight revenue generation. It is bad enough trying to use the tax code for incentivizing behavior, but believing they can remove inflationary pressures with taxes (a role taxes were never designed for) is dubious at best.
4) They say, "it reflects how things really work". What it really reflects is the extrapolation of data from failure states of the government. This, in their minds, justifies expansion of the state. Some view government debt as private profits, that is a dangerous and deeply flawed assumption.
5) i want a government to be able to declare bankruptcy. They should be able to get out of the yoke of long-term debt incurred by previous administrations.
They contend, the ability to print money makes that impossible. If so, the government's (and semi-government fed's) ability to increase the money supply should be strictly curtailed until it is possible.
Without governmental will (which will never exist due to the unpopular decisions it would take), the only way to keep reckless spending in check is to "nuke" the credit lines. That means a limited default is not only a good thing, but a necessity. There would be short term pain, for longer term gain.
My first target default would be Intragovernmental debt (debt the government "owes" to itself, like the Social Security "Trust Fund").
- The New Deal worsened the Great Depression and likely extended it for over 7years. Keynesian economics was never the answer to any question, MMT has the potential to be much worse.
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