Mike Norman does not think that MMT advocates are doing a very good job at communicating the concept of fiat currency. He criticizes MMT advocates as being too wonky for the lay audience. I agree with him only in one respect. Nowhere on the Web is there a brief catchy definition of MMT. Here is one my friends and I put together, which will have to do until we come up with something better.
Modern Monetary Theory is a school of economics asserting that:
-- The currency itself is a simple public monopoly; -- Governments provision themselves by creating taxes that cause people to sell real goods and services to get the funds they need to pay their taxes, and then by purchasing the goods and services they desire with their otherwise worthless currencies;
-- Since the economy needs the government's money to pay its taxes, the value of the currency depends on the prices govt. pays when it spends;
-- For a given size of government, unemployment is the evidence that the government is either overtaxing the economy, or spending too little to compensate for any residual desire to save;
-- Governments with fiat currencies create money at will when they spend, and destroy money when taxes are paid, further indicating that taxes function to regulate the economy, and not to collect revenue per se;
-- The currency is a governmental tool that in a democracy is created and maintained to promote public purpose, and to provide for the general welfare.We know, this needs to be shorter. Our real problem is the problem of shifting public debate from an idea that, however obviously erroneous, has been implanted in the public mind for decades: that the federal budget bears any resemblance to a household budget. Shifting public opinion is a little like turning an ocean liner, it cannot be done quickly.
I had never heard of Modern Monetary Theory until the spring of 2010, when I atteneded the Fiscal Sustainability Teach-In Counter Conference; which was organized to counter a Pete Peterson anti-Social Security conference that was organized for the same day. As I recall, Warren Mosler opened the conference and just blew me away with his presentation on Modern Monetary Theory. It was like watching little Toto pulling back the curtain. When I found out that Mosler was running for the US Senate from Connecticut, I immediately offered my services and found my self managing his Senate campaign.
Thus I found myself in the position of having to explain MMT to hundreds of voters who were not interested in economic theory, but were interested in policies that could lead to economic recovery. I heard all the common Weimar inflation fear mongering, but the real problem was getting heard at all.
Warren Mosler's campaign was a turning point, and I am very proud of the role I played in it. We managed to catapult his ideas for economic prosperity into the mainstream, specifically his idea for a FICA holiday. Unfortunately it was only a tiny FICA holiday, which is why the recovery was so muted. Even more unfortunate, the FICA holiday has ended, withholding has gone up with its deleterious effect upon our economy.
Pete Peterson and his fellow deficit hysterics have been pouring money into his propoganda machine, buying politicians, think tanks, and even journalists to parrot his talking points. MMT is limited to a group of determined bloggers, mostly eonomists, trying to ge the word out.
So it is remarkable that we were able to catapult the idea of the Platinum Coin into the mass media, at least for a few weeks. Still, we need to do a better job of getting the word out. I am working on putting together a MMT talk show. Send word to email@example.com if you would like to know more.
There is a great discussion of this over at Mike Norman's blog.