Anybody who’s anybody feels obliged to lambast modern monetary theory in 2019.
In case you haven’t noticed, a veritable parade of “household names” have fallen in line over the past six months to lampoon MMT and cast aspersions on those who champion the theory.
Virtually none of the criticism is couched in rational terms -Â MMT’s detractors (outside of economic circles, anyway) generally avoid serious engagement with the theoretical underpinnings on the excuse that the idea itself isn’t worth serious discussion. Of course that logic fails – it’s self-referential.
What the cacophony of criticism lacks in veracity, it tries to make up for with hyperbole, ad hominem and allusions to the Weimar Republic. In other words, critics have simply resorted to fearmongering, in part because the theory has found an audience with the likes of Alexandria Ocasio-Cortez who, along with other progressives, are threatening to upend capitalism, a system that works for virtually nobody and is injurious to many, but which is nevertheless worshipped uncritically by almost everyone (capitalism is a lot like religion in that regard).
MMT has been castigated by Jerome Powell, Warren Buffett and Christine Lagarde, for instance. Earlier this year, Jeff Gundlach called the theory a “crackpot” idea and last week, Lacy Hunt made the laughably bombastic claim that if we went down the road towards allowing the Fed to print money (in a literal sense), “in very short order nearly 100% of our people would be miserable, absolutely miserable.”
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Wall Street has adopted a more academic approach to things, eschewing doomsday prophecies for, you know, actual debate and intelligent analysis.
“Without endorsing MMT in its entirety, we think its proponents make a couple of points that are both correct and important”, Goldman’s Jan Hatzius wrote last month, for example.
“This is essentially what the US did in response to the Great Recession, combining large budget deficits with large Quantitative Easing programsâ€, BofA’s Ethan Harris said the same day, adding that while “critics argued that this ‘debasing the currency’ could trigger runaway inflation we strongly disagreed.†BofA did express reservations about MMT in the same note.
Well, on Tuesday, Carl Icahn went ahead and tossed out a couple of meaningless soundbites, apparently just so he’d be on record as coming out against MMT. Here’s what he told Bloomberg in an interview:
You can print money up to a point, but after that point, it could become very dangerous. We don’t want to hit a wall that you can’t recover from. Once you get into an inflationary spiral, it’s very difficult to get out of it — and therein lies the danger.
That is so laughably short on specifics and so bereft of anything that even approximates analysis that one wonders why Carl even bothered.
I’ll tell you what – I’m just going to go ahead and cherry pick a quote from a 2016 CNBC interview with Icahn in the interest of making a larger point about why you should be skeptical when it comes to MMT fearmongering.
Listen below as Carl calmly explains to Joe Kernen how “ridiculous” it is for anyone to obsess over the deficit in a country that prints the world’s reserve currency:
Got that? Here it is again:
We need fiscal stimulus. And this whole obsession with the deficit is ridiculous, I mean the right wing of the Republican party, if you talk to them, you ask them what’s so bad about the deficit at this time, and really there is no answer. They just can’t answer it. I – would tell you that – uhh – in an economy like ours, where you have a reserve currency, this fear of the deficit is completely overdone.
We’ll pause for laughter as you compare that to what Icahn said Tuesday about MMT’s potential to cause an “inflationary spiral”.
Now please, 2019 Carl, tell us again how “very dangerous” MMT is – because it doesn’t sound like 2016 Carl agrees.
Enquiring minds want to know, Walt. What do you think about MMT? Is the only reason to raise rates……to prevent “spiraling inflation”?
Just how much money can we safely “print”?
Inflation is a function of supply shortages relative to demand, it is not simply a function of monetary policy. If the money that the government spends into existence contributes to the increase of supply, then inflation would never become a problem in the first place. But if inflation does look like it is not under control, then tax money out of existence and raise the cost of money (i.e.reduce demand).
Keep watching and learning, like most of us. H will pontificate when he is damn well ready….
History may sooner than we think , cast some light on why the Dollar ceased to be the worlds sole reserve currency… It may in fact come down to the fact that that supreme advantage was abused by the possessor …………
It was VP Dick Cheney around 2002 who said “deficits don’t matter”. I guess they do or don’t matter depending on who says so and when they say so.
Cheney should have emended his comment (recorded in Ron Suskind’s 2004, The Price of Loyalty): “Reagan proved deficits don’t matter [provided the GOP is doing the spending].”
Longtime reader, big fan. Shocked that the real Heisenberg isn’t using his soapbox to stand up to the politicians and their printing presses. They are ready to fatten their cattle. Aren’t you going to say something?
I don’t think you understand what the goal of MMT is — it’s not for politicians to “fatten their cattle”. and in case you haven’t noticed, I’m not yet convinced anybody has sufficiently explained why it won’t work — simply crying “hyperinflation” doesn’t cut here
Heisenberg: you hit the nail on the head. During the 2016 campaign, Icahn and his son called me up for a conference call to compare our approaches. His son had been reading MMT and found it was very close to his dad’s ideas. Icahn told me to ignore whatever Trump said in the campaign; Icahn was going to be one of Trumps closest econ advisers and they were going to ramp up government spending for massive infrastructure investment, job creation, and raising wages. Carl even liked the Job Guarantee but doubted govt was competent to run it so would have the private sector do it. Well, we know how that all turned out–Icahn didn’t last long in the administration and Trump got distracted by other things. And now Icahn has to join the bandwagon, declaring that the ideas he shared with MMT back in 2016 are crazy and would cause hyperinflation. L. Randall Wray