Here is the fun debate over MMT that Cenk asked for!

General Discussion
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(start at 14:44):

Here, @cenkuygur welcomes “a fun debate” as to how MMT makes sense or not. I hope other MMT economists or activists would correct or confirm my perspective, in addition to sharing their own! And I hope others, especially those doubting MMT, would feel welcome to voice their concerns! Together we can provide insights into progressive economics for our movement. :turtle:

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First, to clarify a distinction between the deficit and debt: The national deficit is the difference between how much more our nation spends in its budget beyond how much our nation receives in taxes and other revenue. Then, based on norms, the financing (and sum) of that difference is simplified as the national debt. Again, based on those norms, the assumption is often that that difference in our budget will be resolved with debt, and further the assumption is often that there isn’t much meaningful distinction between one’s deficit and one’s debt.

To expand on that, for currency users such as ourselves we can only run a personal deficit by incurring a debt, and so presuming the previous assumption makes sense. MMT examines the history and process of money, then proves that the currency issuer can run a deficit without debt; and thus the distinction is in fact significant. MMT economists would rather update our vocabulary, because current parlance is inaccurate and unnecessarily (even conveniently) obfuscates reality.

Cenk also conflated the distinction, as if presuming the assumption. He claims that MMT claims that the deficit doesn’t matter, then “disagrees” by claiming to know the debt matters. To claim that [the debt mattering] is to disagree with [the deficit not mattering] is to conflate the distinction. His conflation implies he might not understand MMT.

Next, does MMT claim that the deficit or the debt don’t matter? In a grossly simplified sense, MMT activists claim the deficit does not matter, insofar as the deficit is not itself a limiting factor on spending; especially in response to those who want the deficit and debt to limit spending capacity, (eg: corporate democrat pay-go policy limits). But, that is not to say MMT claims that deficits don’t matter broadly; in fact, MMT is deficit agnostic, and sees real spending limits focused on economic concerns, (eg: inflation, even currency devaluation, etc).

Cenk’s oversimplified misrepresentation of MMT’s claims shows how he does not understand MMT. It is ironic (and sadly counterproductive to progressive economics) that Cenk points to a concern as if in disagreement with MMT. He seems unaware that he is almost using MMT economic analysis.

For any doubting my argument, try googling: [Is currency devaluation a concern for MMT economists?]; my AI response is:

Currency devaluation is a concern for MMT economists, but their perspective on its causes and solutions differs from traditional economics…

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… Here’s why and how MMT addresses the issue:

  1. MMT’s Perspective on Currency Sovereignty:
  • MMT emphasizes that a sovereign government issuing its own currency, and with debt denominated in that currency, cannot technically default because it can always create more money to pay its obligations.
  • However, MMT recognizes that this ability is constrained by inflation, which arises when government spending exceeds the economy’s capacity to produce goods and services, leading to a decrease in the currency’s value.
  1. Currency Devaluation Risks in an MMT Framework:
  • Loss of confidence: Over-reliance on money creation without a clear inflation control plan can undermine confidence in the currency, both domestically and internationally, potentially leading to devaluation.
  • Increased import costs: Currency devaluation can make imported goods more expensive, contributing to inflation within the country.
  • Challenges for foreign currency debt: While MMT focuses on domestic currency debt, it acknowledges that debt denominated in foreign currencies is a risk, as devaluation makes it harder to repay.
  1. MMT’s Solutions for Currency Devaluation:
  • Fiscal policy as the primary tool: MMT advocates using taxation to manage inflation by removing excess money from the economy, thus supporting the currency’s value.
  • Functional finance: Prioritizing full employment and stable prices through active fiscal policy helps maintain economic stability and demand for the currency.
  • Job Guarantee: A federal job guarantee acts as an automatic stabilizer, expanding during downturns and shrinking during upturns, helping manage unemployment and control inflation.
  • Diversification for wealth preservation: MMT proponents advise individuals to focus on assets that hedge against inflation and diversify internationally to mitigate currency devaluation risks.

In summary, while MMT emphasizes the power of currency-issuing governments to spend without traditional debt constraints, it recognizes that currency devaluation can be a concern, primarily through its inflationary consequences. MMT proposes managing this risk through proactive fiscal policies, particularly taxation and a Job Guarantee, rather than solely relying on monetary policy tools like interest rate adjustments.

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Moving beyond my main argument, it seems worth noting a few more things.

First is how economics often acts on one’s worldview subconsciously. In a history of neoliberalism, they deliberately constructed an obscure paradigm. In different places and at different times, politics of the neoliberal order were seen and communicated as disparate things, and so typically not recognized as a singular structure. Such served the interest of those seeking to maintain their political power. (Some argue it was the first such paradigm to conspiratorially do this deliberately, while other such paradigms were less intentional; but I’m not sure how we could know that).

MMT has studied how money processes work; it has helped to reveal what we have been doing, and so further illuminates how we could then do things differently. It is described as a lens of analysis. It is interesting to me that Cenk’s position, expressed as the real concern of currency devaluation, was more of an MMT analysis than the previous paradigm, and he did not know he was doing it. He was looking for potential limits to our economy, differently so than how such a limit would have been looked for under past economic orders. I expect he would be not as concerned about the debt in the case that it were shown to be expanded in a productive way.

I have posted elsewhere on these forums about how the neoliberal economic order had been adopted by both parties. I had made a point about how we need both parties to move to another economic order, in order for left vs right politics to “cooperate” via exploring disagreements, (as opposed to not cooperate via civil war). It appears Cenk is beginning to operate within the next order. And many examples can be drawn showing members of both parties also moving over to the new order.

I wouldn’t have thought the new order would be so naturally self-hidden. Perhaps it is a holdover from the nature of the previous order. I feel like we might consider making an effort in our politics to not so easily allow our paradigm to become subconscious. That way we could continue to be self critical and adapt with the accelerating changes to the needs we are facing.

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And a second thing worth noting is that I have not actually addressed @cenkuygur’s concern for currency devaluation. My argument was focused on how he was concerned, rather than what he was concerned about. Though, the AI response to the issue somewhat addressed the point. And I should admit, though I’ve been studying these things for over a decade, I’m actually currently focused on learning more about the international economic dynamics and geopolitical concerns, such as what Cenk is concerned about. Which is to say, I’m not as confident in minute details.

That clarified, as the AI already started, if we are concerned about the value of our currency, then we could invest into our economic production, (which Biden had done a bit, which Trump has undone). There are plenty of things we should invest in, even with deficit spending, that would return in real value. If such investment is improperly financed with debt, then the majority value of such return would be extracted and centralized, rather than embedded and socialized, (ie, we would not access nor feel the benefit of investment). Private investment interests would oppose such public investment, even when they are not themselves interested in the investment opportunities; (I have elsewhere said, public investment is central to modern politics). We have a significant issue of financialized capitalism parasitizing the global economy. We will have economic disruption as finance-capitalism self-destructs; (as Michael Hudson says, debts that can’t be repaid won’t be repaid). Debt cancellation is acceleratingly necessary, which indeed entails disempowering the bankers controlling our public currency. The US dollar as global reserve currency does nominally benefit our national economy, and indirectly benefits our real economy in the second order; though following order effects undermine our long-term capacity, in service of centralized finance at the expense of even our own citizens’ wellbeing. Our escaping the political rule of finance capitalism will very likely entail economic hardship for our citizens as well, at least in the short term, though ideally we would organize, invest, and overcome. I suspect Cenk’s concerns are related to how increasingly ill prepared we are for this transition, especially as it is intentionally being rapidly accelerated by techno-fascists during Trump’s presidency.

I would strongly suggest these two interviews regarding such current geopolitical economics:

It would be great to have economists on TYT more often, btw. Especially considering a primary aspect to our politics is economic populism. We would benefit from a dedicated and ongoing series on TYT discussing such issues.

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Lastly, for a third thing. I’m putting on my ecological economist hat now, to speak to other more fundamental threats of inflation; (interrelated with the second of the videos in my previous comment).

If we were to cut fossil fuels as we need to, then our modern economy can not function, and we will have hyperinflation as demand exceeds supply for basic needs via modern networks, triggering mass starvation and global war. (I’ve posted about such energy blindness issues in the threads). We need to transition our economy carefully with large public investment in the right capital to secure the basic necessities globally, such as energy, food, water, housing, etc. The risks of the apparent incapability for our global ecology and economy to do so in time (before ecological collapse, which is the foundation under economic collapse) informs why our military industrial complex is desperate to prevent certain geopolitical blocs from acquiring nuclear weapons.

We therefore need to also make large investments into a wide array of critical technological innovations. For example, geothermal energy is limited to certain geological regions, based on our current drill tech limits; new drill technology initiatives literally melt through rock and might drill deeper, such that geothermal energy can be made available to many more geographical locations. Another example of critical tech includes advanced fermentation for new food sources.

I don’t want to go too deeply on ecological issues here, but it is simply worth noting that ecology is the basis of economy, and so ecological risks (which are typically masked by financial capitalism paradigms) are the deepest risks underlying inflation.

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In closing, I presented my main argument on how I disagree with Cenk, and I gave three further tangential points; economic paradigms, geopolitics of currency valuation, and ecological crisis. Thanks again for your attention! I look forward to discussion. :turtle:

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A few days ago @cenkuygur had the (above) discussion with Prof Wolff, and during that I found Wolff’s brief description of government deficits implying government debt to be incorrect, as MMT shows. Also, I know Wolff has an understanding of MMT. I suspect the MMT details were simply not important to Wolff, to his intended points, especially since they could be a significant tangent.

But, MMT is not just a tangent for this thread. It is unfortunate that the MMT details were not clarified in Wolff’s discussion with Cenk. So, to help expand the discussion further, here is one of Wolff’s presentations on MMT, (which more accurately describes government deficits):

And further still, this short article is also informative regarding Wolff’s positioning around MMT politics, (emphasizing Wolff’s position of actually realizing public money, beyond basic MMT):

And even further still, this clip features Wolff himself on his political positioning around MMT, (emphasizing why and how he’d suggesting using public money):

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This tangential thread explores a history of money, and ties into MMT.

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The interview highlighted in this thread explores wider concerns, and opens up how MMT applies to modern politics: