Dude’s an ultra
Bonus: https://nitter.net/uncle_authority/status/1721967810241335347#m
I guess the Deprogram guys are the Three Stooges now? But the joke doesn’t really work
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I used to think he has good takes until I saw him railing against Modern Monetary Theory (MMT), on Twitter (funnily enough, it is also somehow brought up in the bottom screenshot of this post).
These people think they understand Marxism, yet they don’t even recognize that Stalin’s economic policies were not only strikingly similar to the principles of MMT, but possibly the only time the core principles of MMT has been put into practice.
Why do you think the USSR was the only country that achieved remarkable success in state planning? It was the financial system put into place by Stalin, which was immediately thrown into dustbin as soon as Khrushchev took power. Not even China could achieve that without relying on foreign investments and cheap labor.
that's not really true, all economics is political and mmt is dripping with reformism trying to solve the problems of capitalism in the sphere of distribution instead of production, it muddles class realities by suggesting that "we" could print money to pay for things that "we" want while nudging class rule and dollar imperialism behind the sofa. marxist spaces are brimming with well-read people whose eyes roll back in their head when someone's naive enough to give mmt a sympathetic treatment, and roderick was channeling that annoyance
similarly he feels confident in taking shots here bc of the sort of ambient skepticism toward hakim's religiosity that others have voiced a thousand times before
his problem is that he's a professional twitter user who doesn't know how to shut up and with only 140 characters he ends up shadowboxing with, like, context that's totally foreign to anyone not already plugged in to the capital d discourse
Sometimes some crappy pseudo leftist political parties push it like that but in a marxist context it doesn't have to be.
In the lower phase of socialism you're still gonna have money, and MMT seems to be the most coherent idea on how to handle money, that's it. It's a tool, not an ideology in of itself.
The real problem with MMT isn't that it's reformist, it's that not that many countries today have truly sovereign currencies.
Can you elaborate? Because this is a very contrived view of MMT, which is essentially just a lens into understanding how money works.
Michael Hudson has written a lot about this in his books Super Imperialism, Killing the Host and Destiny of Civilization.
You do realize that MMT is derived from Marxism, right?
Michael Hudson is a Marxist. Minsky (Stephanie Kelton’s PhD advisor), whose work formed the foundation of MMT, was a Marxist (confirmed by Hudson).
mmt even strictly as an economic theory separated from macroeconomic policy isn't really descended from marx, my understanding is that there was maybe a little bit of interplay way back when liberal economists weren't sure yet that fiat could work as a money commodity but after that all of these related ideas like role of the state in guaranteeing public welfare with monetary policy and the idea of inflation as a substitution for taxation flowered independently within bourgeois economics, and that's what mmt as formulated today draws on. it's not surprising, economics is the priesthood of capital; financial capital is ascendent but monetarism doesn't work to check the destructive instability of free markets, the inefficiencies of specie and taxation are a constraint on growth, and mmt's explanations in terms of circulation suggest solutions that avoid challenging relations of production. it's not contrived, this is the actual social basis for the development of the theory. you can see premonitions of this in marx's time, proudhon argued against liberal monetary policy from a petty bourgeois perspective (i.e. while maintaining private production) but marx insisted that he and the liberal economists were all missing the real point that production ultimately gives rise to money and not the other way around:
production begets money which feeds back to further production, but production is the primary regulator. you can try to find insights in mmt if you want to flesh out the money->production leg of the dialectical loop - hudson leans (way too) hard into this and graeber flips the precedence entirely upside down - but since mmt as such was developed to exist as a myopic slice of "the question in its pure form" I think it's fair to say that it's non-marxist
Exactly, MMT is Keynesianism for the 21st century.
I like this comment on the blogpost:
I meant to add before that I first ran into mmt in my phase years ago of being fascinated by the market and listening to every hour of every bloomberg podcast for like 18 months. I remember that joe weisenthal and tracy alloway kept having mmt people on their podcast over and over and over to critique the fed and talk about mmt, and that really goes to show how comfortable that section of the bourgeoisie is with accommodating this whole idea. as long as you only address circulation, finance capital keeps benefiting in distribution, and nothing shakes its foundation in production. if you flip it on its head and start talking about changing relations of production you end up in a black plastic bag behind bloomberg's mansion on long island
Yeah and the critiques amount to "austerity politics is stupid, causes recessions, is simply capital inflicting wounds on itself, the government should spend money and it would be better for everyone", without thinking about why austerity makes sense to capital. Keynesianism rebranded for the 21st century
https://thenextrecession.wordpress.com/2017/07/13/will-reversing-austerity-end-the-depression/
in the imperial core.
I think the source of arguing over it comes with the territory of whether people are using MMT descriptively or prescriptively.
which countries have currency sovereignty and which don't can tell you a lot about imperialism and hegemony
This is true, but the complication with developing countries (and I believe this is what the person you’re replying to was implicating without elaborating) is that more often than not, these countries also take on foreign loans, usually denominated in dollar.
If you take on a huge sum of dollar debt, this effectively limits the fiscal space of countries even with monetary sovereignty, because institutions like IMF will often impose demands like austerity measures (e.g. “cut back fuel and electricity subsidies”) to limit net public spending. You don’t follow the rules, you don’t get the loan, and your people starve.
All 5-6 of them ?
MMT gibberish to me
to this I would add tax liability under sovereign currency creates demand for the currency that otherwise has low value (socially necessary labor time required to produce). this is the part goldbugs don't understand. Of course the dollar inflates. Because it's backed by bourgeois state coercion violence rather than by the value of some metal coming from a mine.
That's a remarkably succinct and elegant summary. The only thing I can think to add is that taxes can also be a punitive measure to discourage certain behaviors i.e. nicotine tax
Makes a lot of sense. One interview I saw with Michael Hudson he seemed to say that government spending domestically doesn't cause inflation, but he didn't really have a chance to elaborate so I'm not sure what that meant. Something like, balance of payments is more important, for example I think he said the Weimar Republic experiencing hyperinflation was because all the money they printed went toward exchanging for foreign currencies to pay war reparations etc which drove down the value of their currency, but if they had just been printing money for domestic spending it wouldn't have caused such inflation. Idk if anybody here could clear that up for me. Intuitively, it seems like more government spending would increase the money supply and therefore be inflationary, but does anybody know what Dr Hudson was getting at?
MMT has always asserted that inflation risk is only a problem when you have full employment and resource utilization has been maxed out. That increasing money supply leads to inflation is a monetarist (neoclassical) myth, with little empirical evidence to support.
The problem with most countries that follow neoclassical economic theory (which is pretty much every country today) is that they spend too little, and when the government does not spend, there is not enough money to go around, people will have to borrow/take out loans from private creditors, which benefit the bankers/finance capitalists.
Hudson is right that hyperinflation almost always occur because of foreign debt, and in the case of Weimar Republic it was because of the forced reparation by the Allies (who were in turn forced by the US to repay the debt financing the war effort). This was detailed in his book Super Imperialism.
Yeah I'm working through reading Super Imperialism right now actually, I read the first few chapters but got distracted by something else a while back, I'll probably have to start over. So I got to the part about the system of circular payments between Germany, the Allies, and the US. Thanks for explaining more about what MMT says on inflation.
So basically, in the US for example, the government could afford to spend a lot more domestically without risking inflation because employment isn't maxed out and there's a lot of productive things the money could be spent on to improve the economy, so you don't end up with "more money chasing the same amount of goods" as the traditional (neoclassical) wisdom goes? That also makes sense to me.
I think Hudson goes on to describe how a huge amount of US dollars flow out of the country through both the trade deficit and US government (military mostly) spending abroad, end up in the hands of foreign central banks who can't do much with them other than buy US Treasury bills and that this new circular flow of money (with the US as debtor this time instead of creditor like the post WW1 era) forms the basis of US dominance over the world financial market. But I'm not sure how this part interacts with the basic MMT ideas above. Would Hudson say, basically, that the US could/should be spending its money domestically in the way that MMT says it can instead of doing Super Imperialism by flooding dollars out to the world?
TL;DR: Dollar hegemony has nothing to do with the ability of US government to spend domestically. It simply allows the US imperialist to get free lunches from across the world. But they’re two separate issues.
A lot of people get confused by this. But it’s two separate issues:
First, it’s not so much about spending domestically, but the fact that the neoliberal government refuses to deficit spend and instead chooses to adhere to austerity (spending not too much than than what you “earn”). It treats government spending as if you would treat your own household spending, which is nonsense because the government is the currency issuer (it literally is the one that creates the money), whereas as individual households you do not have that power.
What this entails is that since the government is not spending (government spending = private sector saving), there is not enough net new asset that flows into the pockets of the citizens (private sector), and to fuel the economy the private sector (businesses, consumers) has to take on loans from private financial institutions. This results in the rise of debt owed to private creditors, where the profit and earnings of private businesses and citizens now flow into the banking sector.
What MMT is prescribing is simply that government spend as much as it wants without even looking at how much it “earns” (taxes), and this is typically done by some kind of large scale infrastructure building program. This public spending creates jobs (new hospitals and schools need to be built, more demands for goods and services, more suppliers are needed etc.), improve the wages and living standards (less reliant on taking loans from banks, while new hospitals and schools reshape the surrounding environment that improves the quality of living etc.)
Even if inflation happens, so what? If wages are increasing faster than inflation, what’s there to worry about? This was what happened during the War Economy in the United States during WWII - full employment, all industries repurposed for the war effort - and brought the country out of the Great Depression in just a few years.
——
Now, on to the second part, which is how dollar hegemony relates to all we have just said? Actually, not much at all. It doesn’t affect the US government’s ability to spend domestically.
It is important to note that, in this context, dollar hegemony simply means that the US can get “free lunches” from all across the world by printing dollars out of thin air. Because every country needs dollar (because they owed debt in dollar, or because they need to import essential goods priced in dollar, because it is a reserve currency that is accepted by everyone relative to other currencies etc.), so long as they are willing to export their goods and services to America to receive dollar, the US can simply print as much dollar as needed to pay for them (i.e. essentially for free).
These exporters, upon receiving the dollar and after using a portion of them to import American goods (or other goods sold in dollar), will have to keep their surplus dollar somewhere. Since they are not allowed to purchase critical American industries, their best bet is to buy US treasuries to earn interests. As such, the surplus dollars are recycled back to the US treasuries, which in turn allows the US to spend even more dollars overseas (to build military bases surrounding their countries, for example) since the surplus has already been absorbed back into the US treasury.
In other words, the US treasury acts as a vehicle to absorb the imbalance in the balance of payment caused by America printing money out of thin air to get free lunches from overseas.
——
That’s it - it’s the mainstream narrative that is confusing a lot of people: America borrows from China! We are debt slaves to China! If China wants us to repay our trillion dollar debt (actually down to $800 billion now), then our country will go bankrupt!
Actually, it’s more like this: China is a net exporter to America - China receives payment in dollar - China stores the surplus dollar in US treasury (“lending to the US government”) - Chinese holding of treasury bonds mature - time for US government to pay up! - Federal Reserve credits the exact amount of money (created out of thin air) back to China’s account in the Federal Reserve plus interests - China again not knowing what to do with the dollars - China buys more US treasuries with the money they just got back - rinse and repeat.
As you can see, none of this impacts the US government’s ability to spend domestically, like giving free healthcare to everyone.
Great explanation, that really helped some things click for me. Thank you!
this is pretty deeply misleading. dollar demand from other countries (the petrodollar, china being developmentally chained to the us, etc) props up the exchange rate of the dollar and therefore also limits inflationary pressure on imports. the upshot is that fed can print money to cover fiscal deficits or stabilize the domestic economy w/ qe without worrying so much about inflation hurting americans because it's distributed across the entire world while the benefits are only realized here. there's only so much productive capacity to draw on and dollar hegemony allows the us to effectively shift its spending abroad and its concentration of wealth at home. e.g.:
some domestic owners of the dollar may see higher wages but the trillions of dollars of t-bonds and hard currency held by china, japan, latin america, and the arab world see only devaluation
This is completely wrong, both empirically and theoretically and shows the liberal ideology deeply embedded in MMT theory.
The stuff above is largely correct but better stated in the Marxist way. There are two kinds of government appropriation, real and symbolic. Real appropriation is spending, the government ordering people to do something, build a road, teach some students, etc. Symbolic appropriation is taxation, it doesn't actually matter that the government takes some bits of paper (or gold), but it justifies the real appropriation and sort of determines how the burden of government action is distributed.
None of this is to say that getting rid of taxation is a good idea, indeed, it is impossible to get rid of government appropriation without getting rid of government entirely. It is worse to have a hidden appropriation that has distorting effects as in the case of the Soviet Union and better to have transparent taxation which doesn't punish certain kinds of enterprises (namely the state owned ones, by requiring them to fund the whole government).
Mmt requires monetary sovereignty. The way you get to have monetary sovereignty in a global economy with fiat currencies is through military might.
That’s not to say the use of force is bad. It is to say that mmt freaks need to examine what would happen if they went mask off and said
“a dollar is a dollar because I say so!”. Instead of what is possible after they do that.
Would everyone else in the world do the this is fine meme when America begins a new layer of extraction laid over the top of their entire monetary system so we can have single payer or light rail or ubi or whatever?
No matter the system of social organization in the global hegemon, mmt would amount to extraction by arbitrage.
MMT as it has been presented to me is missing class analysis and seems like liberals trying to do anything besides marxism.
i'd prefer it to the current regime but it's incomplete like newtonian physics.
MMT isn't an ideology, it's a theory of how money works, and the fundamental assumptions are absolutely compatible with marxist thought. There are caveats to it and it absolutely could be misused by a liberal state but it could also be used to build socialism in its early stages. You're not going to be able to get rid of money immediately, you need a transitional model, MMT could be that model.
Financial system was a key to success in planned econom? what are you on about?
How are you going to build public infrastructure without a financing mechanism, let alone on a massive scale like the USSR did?
While the rest of the world was still preoccupied with the gold standard, Stalin already understood that public spending is limited not by how much metal you own, but by the availability of labor, resources and technology. The ruble went off gold, and the USSR was able to publicly finance their massive infrastructure projects simply by “printing” as much money as they wanted.
To keep inflation in check, they came up with a “dual circuit monetary system”, which is quite ingenious on its own. You have one circuit where the state development banks spend huge sums of money to finance public projects, and another circuit is where the money is circulated to the hands of the citizens for their retail and consumption etc. The latter is closely regulated to ensure that the amount of money supply does not exceed the capacity of the supply of goods and services (for example, through the monitoring activities of Gossnab), and thus inflation was able to be minimized. (Khrushchev abolished Gossnab in 1953 as soon as Stalin died, among many other things, and everything has gone downhill ever since).
On the other hand, Trotsky was also a huge advocate for state planning, but he also wrote that “FDR’s New Deal would bankrupt America” (America suspended the gold standard during the New Deal). All this suggests that if Trotsky had been in charge, the USSR would have been too afraid to spend money on public infrastructure projects, and it would have experienced a very difficult if not a dire economic situation, especially coming out of the Civil War and the NEP.
All this just to say that Stalin was truly a financial genius, apart from being a political genius. He spent 17 years (!) trying to get the Soviet economists to compile an economic textbook that would help perpetuate the sound economic policies, but apparently this effort went down the drain when Khrushchev took power and instead spent most of his time demonizing Stalin and reversing his policies.
You do it by doing systems of linear equations of input output tables, leontiev style.
The ruble was short hand as was dual circulation systems because they couldn't precisely calculate the whole economy. They did giant interindustry ones, and smaller at the local scale but then it all have gone out of the window. On the level of single factory its a trivial matrix multiplication.
The plan was first, the ruble was whatever it haas to be.
MMT answer would be to hose with roubles needed insdustries and take in taxes surplus to stop inflation, where on earth that relationship was used in ussr
I am seriously scratching my head over this one, because it doesn’t relate to what I am saying?
How does input output used for planning negates the need for a financial system? How are socialist enterprises and organizations going to settle payments among one another, and with the State Bank? How do socialist enterprises pay their workers wages? How do the Soviet citizens pay for services?
The problem is not so much how to plan the economy, but how are you going to finance the economy.
?? I literally just described how it works in my post above.
GOOD post, thanks for making those connections and explaining your case, also fuck Trotsky lol. Reading recommendations on the dual circuit and Soviet development during that era?
I have this post that touches on the subject although I'm sure @Kaplya@hexbear.net can expand on the subject as well.
Economic planning cannot take place without a solid understanding of the instruments of financial capital, even if the goal is their abolition.
I really doubt that MMT could be applied to post-NEP USSR, because its economy functioned on radically different principles than capitalist economies.
MMT has little to do with whether it is a capitalist or a socialist economy, it is simply a description of how fiat money works.
MMT: the ability of a government with currency sovereignty (not pegged to gold or other currency) to deficit spend is not bound by the taxes it collects
After WWI, many countries re-pegged to the gold standard and eventually walked into the Great Depression in 1929-33 as their fiscal space was limited by the amount of gold reserves they possessed.
In the USSR, there was a brief period of toying with returning to the gold standard during the NEP (golden chernovets), but as Solonikov (People’s Commissar of Finance) was expelled in 1926 after joining Kamenev and Zinoviev’s “new opposition”, the issuance of chernovets stopped, and ruble was decoupled from the gold standard.
Fig. 1. Average monthly volume of ruble in circulation in the USSR (in trillion). Source: Central Bank of Russia
Look at how the money supply shot up exponentially as the USSR entered the first Five-Year Plan in 1929 to finance public infrastructure projects at a scale never seen before. There is no way that they could have created so much money if they were to adhere to the gold standard.
Meanwhile, Soviet citizens paid very little taxes while getting free housing, education, healthcare and public services. The USSR recovered to its pre-war economy in just 5 years, while keeping pension and social services intact, after half of the country was laid in ruins and 27 million Soviet people perished during Nazi Germany’s invasion. There is no way they could have done that while keeping to the neoclassical (monetarist) theory, after experiencing such economic devastation.
According to MMT, a government with monetary sovereignty can spend as much as it wants and is only limited by labor, resources and technology.
Stalin at the Plenum of the Central Committee of the All-Union Communist Party of Bolsheviks, 1933:
(Note: the US eventually also went off gold in 1933 during the New Deal, re-pegged to gold during the Bretton Woods from 1944 until Nixon’s decoupling in 1971)
Good poast hot damn
The reason citizens paid little tax was because the government got most of its funding from SOE profit. It has nothing to do with MMT.
This makes no sense under fiat monetary sovereignty. The government never makes a “profit” or a “loss” in any meaningful way (in its own currency).
It would be closer to the truth to see it as the government 1) never having any money at all, and 2) having the power to distribute to others arbitrarily large amounts of money and 3) having the power to destroy arbitrarily large amounts of that distributed money through taxation.