65/ After spending ages on inflation, I’m apparently breezing through chapter 3 “The National Debt (That Isn’t)”

Basically, in the same way tax isn’t real (in that it is just a mechanism to remove money from the economy and/or create demand for the currency. MMT says that the deficit isn’t real. Very clear that it is the US they are talking about. To generalize to more countries she picked the UK and I would’ve preferred another more “normal” country.

67/ To be fair, I think that issue is pervasive in the whole field. They are not able to separate ideology from models of the economy. And then they infuse in morality and destiny and Right and Wrong in these models until it’s more mythology than science.

And I don’t mind ideology. I have a great helping myself. But when you’re already in a non rigorous field, mixing opinions into “models” makes the whole thing even less serious.

A complex system is what it is. You find out the shape of it empirically. You can form hypotheses, design experiments and test. You don’t sit in a corner and Devine It. You might have a famous “shower thought” but then you test.

And seriously, these people (economists) don’t test ANYTHING.

68/ I really thought I’d be more convinced by leftist economists. But they are methodically all very similar. And it is the methodology I have issue with in this whole… project(?).

This field has imo structural issues and they aren’t fixed by the practitioner being less of an ass.

The problem is they believe in these simplistic models and that is standing in the way of developing the kind of tooling, discipline and humility needed when working with complex systems imo.

75/ Chapter 5: “‘Winning’ at trade” is interesting, but doesn’t really go into the depth I’d like (but I guess after reading 4 Econ books in a row I’m not the target readership). The chapter is very “political” and idealistic rather than descriptive, but that was a tendency we saw earlier too. The basic idea is that a trade deficit isn’t a bad thing. She goes on to envisage a world economy that is more… equitable? It argues for developing countries to focus more inward, and diversifying their economies, perhaps making them less vulnerable to the global markets. It argues against losing control over one’s own currency (its MMT, so obviously). It makes clear that the dollar gives the US an outsized influence and leverage over the rest of the world.

She criticizes both democrats and republicans, but seems to have a soft spot for Bernie Sanders. He hired her to work at the Capitol, so I guess that makes sense.

The MMT premise seems to be that you don’t have to “have the money” to fund guaranteed full employment or “entitlement programs”, because the control over the currency means that the government always “has the money” to pay.

76/ The “winning vs losing” at trade is explicitly directed at Donald Trump. But she spends a lot of time emphasizing that American workers have lost jobs (“well paid union jobs” comes up several times) when production moved offshore.

It feels to me like she is arguing for a midpoint, a more protectionist approach, but not measuring in trade deficit/surplus, but instead in… standard of living?

She gets slightly into the topics of “The Shock Doctrine” in that the international trade organizations and the world bank became dominated by extremist (my word) capitalist forces.

79/ But the book is supposed to not just be a work of ideology, but provide a way through this mess we’re in, in the aftermath 🤞of a global economy dominated by extremist capitalism.

And that premise is based on this currency “trick”, and there I am not yet convinced tbh.

84/ Ok, chapter 4 “Their red ink, is our black ink”. I think it was Keen in one of his podcast episodes who said something that I hadn’t considered. From memory: as a country’s economy grows, whatever that means, the money supply would need to grow too.

Looking at population growth alone that makes sense to me. And that means that my mental model of a fixed “amount of money we have” isn’t correct. It would, at least over longer periods of time, need to be elastic in some way. And I can’t see how that could be a global zero sum game either, since many countries that were poor a century ago, and are still poor today, often still have a “bigger” economy than they did a century earlier.

92/ As some folks have alluded at (where does the new money actually go) and based on something she says earlier in the book (that deficits have actually been too low) I started wondering. Imagine I have a truck full of dirt and I tell you I’m going to pour it out, you’d think it would create a pile of dirt, right? But what if I pour it into a hole. We don’t get a pile, we lose a hole…

The thing that I think MMT are arguing is that “debt” isn’t “debt” if it’s monopoly money you made up. To you as the money machine it behaves differently. And debt isn’t debt. It’s potentially pothole filling. But that means something is absorbing money, and don’t just say “rich people” because that is lazy. Are there holes? Where are they? What would be the effect of filling them? I’m assuming that filling different holes would have different effects. And maybe that’s MMTs thing: to fill the unemployment/underemployment hole? And from there achieve an effect?

94/ Still in chapter 4. She was discussing another economist, Wynne Godley, and so I had to look him up and that opened another line on economic models: equilibrium models (the “mainstream economics” models) and a set of models referred to as “accounting models”.

Steve Keen, who a lot of folks have brought up (the guy with the podcast “Debunking Economics”) seems to be one of the people who are proponents of “accounting models”.

And it seems to me that MMT draws from the work of economists in this area.

Wynne Godley was credited for predicting the financial crisis based on his model.

This paper looks very interesting because it seems to contrast the two approaches. Which tends to be illuminating in my experience.

“No one saw this coming. Understanding financial crisis through accounting models”.
https://pure.rug.nl/ws/portalfiles/portal/2646456/09002_Bezemer.pdf

95/ so far my (quite shallow) understanding is that these “accounting models” model flows of money. With the basic premise that money has to come from somewhere and go somewhere. Or more accounting-wise that a subtraction one place has to lead to an addition of equal size (possibly the sum of multiple additions) somewhere else.

This relates to the idea that MMT presents, which Wynne Godley also seems to have supported and Richard Vague (above article and TED talk), that a deficit for the state necessitates a surplus somewhere else. Found this graph from Godley using his “sectoral financial balances” framework, depicting the US economy. This graph is very similar (perhaps identical?) to what Vague shows in his TED talk. They both show what seems to be an inverse relationship between a public deficit and a private surplus.

100/ but hold up… I just argued that the size of the money supply was not fixed… but I guess that fits… because the public side can create money to cover it’s deficit, but private sector doesn’t have that option. So under austerity we create a zero sum game.

Am I even making sense anymore ?