The benefits of MMT

Martin North with Steven Hail from the University of Adelaide on MMT:

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. The inherent problem with MMT and with QE, that the economics profession is incompetent about, is the extent to which it inflates economic rent. This is the extent to which harm is done. The opportunities for the rent might be there anyway; for example, the urban planning that enables rent gouges in urban land. But QE and MMT are like connecting a turbocharger to these opportunities.

    You need to visualize the system independently of currency, as “resources converted into goods and services” versus “economic rent”. The first is “all real wealth”; the latter is zero-sum gouges out of it. Those zero-sum gouges are not harmless to the process of creation of all real wealth. The rate at which resources are converted to goods and services will be constrained or crowded out by successful rent-seeking. QE or MMT, then, will reduce the creation of real wealth to the extent that rent-seeking is maximized by them.

    Like I said, you need to visualize the system quite apart from “currency” to understand this.

    • ChristopherJ

      Inflation is what you are talking about, Phil? So if I get you right on this, as the money helicopters its way down to the people, existing rentiers syphon off those dollars by increasing prices?? This is the inherent problem with MMT and something the heterdox economists are blind to?

      You are a clever person

      • They’ll be surprised even more if inflation does kick in, and all those social security obligations take a huge portion of the budget.

      • It is not even controversial that loose monetary policy pushes up asset prices. What the economists are blind to, are the distortions that make this happen in the case of land (monetary expansion does not cause the same inflation in markets where land supply is able to be switched between uses of land by the market, not by planners) – and the economists are also blind to the way that economic rent crowds out actual productive investment and production.

    • ComingMEMBER

      In what possible way could a theory inflate economic rent ?

      A theory: that is a way of understanding how the government, private and external sectors interact?
      How can a theory cause economic rents to rise ?

      Would you care to expand on your bizarre assertion? I think there are a few steps missing

      • Not the “theory” doing the inflating! The practice, the printing of money, when it happens.

    • SweeperMEMBER

      Isn’t deflation an economic rent to those with fixed income nominal assets?
      btw I don’t agree with MMT either but for entirely different reasons.

    • DominicMEMBER

      I was at a BBQ on Sunday and a mate and I agreed that religion itself is no longer a hot potato topic — you can talk about it openly without much fear of offending anyone. The ‘new religions’ on the other hand …..

      • DominicMEMBER

        Wrong again, I’m afraid. Austrian economics is based largely on classical economics — the understanding of economics before the lunatic fringe muscled in: Keynesian theory and monetarism. I’m surprised as a Left-leaner you’d support either of those given they’re partly responsible for gifting huge fortunes to the 1%

    • bcnichMEMBER

      MMT is coming, probably 2/3 years away
      We are now headed into global recession and the next 2/3 years into 2022 we are headed into a global debt deflation deleverage and some sort of modern depression, this time the photos of food queues will be colour not black and white.
      As the Euro collapses people will run to the USD, the strength of the USD will cause the global collapse to be worse which starts in EM, and finished in the US from the strength of the dollar that will take US down guess around US 2020 election
      Have a look at the 100 year DXY chart, in 1937 and 1985 the USD went through the roof very quickly as capital flowed into US as safe haven
      In 1937 the US devalued the dollar think it was fixed then and in 1985 the G5, coordinated a depreciation of the dollar
      When the dollar is depreciated and replaced as reserve currency – I’ve read IMF lagarde is pushing SDR, that’s when inflation will shoot through the roof, gold etc will soar
      I think at that point they will bring in MMT in a depression
      You need the deflation before the inflation, they printed 16+ Trillion and couldn’t create inflation
      Even if they print another 50 Trillion they won’t stand off inflation
      MMT is coming but we need the crisis first

      • I agree with that pessimistic assessment. We are in the “decline and fall” phase of our civilization now. “Whom the gods would destroy, first they make mad”. I thought by the 1980’s we were never going to go this completely infantile, fairy-dust way again. But something struck back with a vengeance after 2007. The build-up itself was a matter of unreason and incompetence, and the response just crowned that unreason – and is continuing to do so.

      • DominicMEMBER

        Yup, broadly agree. There should be no mystery though as to why QE didn’t create inflation (in the CPI, at least) — the vast majority went into financial assets. via the banks and other financial insitutions. The epic stock and bond bubbles are ‘Exhibit A’, so to speak.

        MMT, however, is QE for the people. That will rock the CPI, big time, and once the inflation genie is out of the lamp it’s game on. The idea that authorities can ‘control’ or ‘contain’ inflation with taxes (or any other device, for that matter) is pure bollox. Hubris, if you like.

  2. ChristopherJ

    What this guy misses is that the commonwealth financial legislation is constructed so that governments are fiscally constrained to a spending ‘pool’ of the consolidated revenue fund which is comprised of this period’s tax receipts. Any spending beyond that must be borrowed on the market.

    This benefits the banks and financial sector enormously – risk free assets for them, for example – but it is not a misconception (as our guest alludes to in the clip) by our politicians about how money works for countries like Australia – the monetary sovereign bit. No, they know how money works and many understand some aspects of MMT. What they follow is the conventions within the Australian Federal budget processes, which are codified by the public servants and advisors and, importantly, are underpinned by Acts of Parliament.

    So, if a government were brave enough to challenge the status quo, it would require significant legislative change, which is entirely within its purview of course. But, there is a mountain of professional public servants that have curated and cared for that legislation, which they believe puts a constraint on the mischief politicians could unleash if the only financial constraints they faced were things to buy and people to hire.

    There are massive barriers in place to prevent a government pursuing an MMT spending program. One of them is the significant effort that goes on within the msm and the economics community to discredit heterodox economists and MMT in particular. Thus it becomes hard for any government (or leader for that matter) to align themselves with a ‘theory’ which is untested and which many lump with the other conspiracies.

    Some are hopeful that the green new deal or similar, real concrete steps to reverse the damage we have done to the planet, which would require spending that is well beyond our taxes would allow governments to start using MMT. I think it is way too late for that, but some still think we can defer any action for a few more years/decades yet,

    • BabundaMEMBER

      Yeah we are never going to jump first. We never do. We lack the self-confidence. Also I don’t think a small open economy can implement MMT alone. It probably needs a wholesale reworking of the global financial system. We are overdue for one.

      • ChristopherJ

        thank you, Babunda. Australia rarely goes anything alone

        Climate Armageddon, once everyone is happy that it’s impending, will trigger the MMT firehoses. We’ll be proven right, but it will be too late for any celebration.

    • Interesting comment. Tks. The discussion needs to be out there, we need to find a way to de-link the financialisation of the environment from our economy, and fast. Global warming is one thing, but the biodiversity collapse and the plastication of our oceans are now urgent issues.

    • Would the RBA be constrained in the same way?

      is there anything stopping the RBA, say, forgiving HECS to increase consumer spending, or outright spending new money on selected projects?

      Eg, could they do something big like buy the nbn effectively giving the govt 50bn?

      Or buy a bunch of childcare centres and fund them with new cash?

      Maybe even buy the land schools sit on and lease them back for a dollar?

      Could MMT take forms like that? Are they constrained as the government is?

      • ChristopherJ

        The RBA has powers to intervene in the markets to support the AUD and, more recently, the stock market. These are MMT-like payments as they are not funded out of the budget to make these sorts of expenditures.

  3. Moments like these you need a Minsky

    Excellent video, very clearly articulated.
    Thanks HnH and Martin North.

  4. Gabrielle Peut

    Hail is wrong that Australia’s doesn’t have much foreign currency-denominated debt. 66% of our 12-month foreign debt.