Great Leap Forward


We’re nearing election day and unfortunately we’ve got no choice. Whoever wins the election, Pete Peterson wins. He’s bought off both the Democrats and the Republicans. We’re going to get fiscal austerity no matter what. Both parties promise to cut social benefits, punch more holes in the safety net, and let Wall Street continue to run off with all the loot.

Get ready. The first order of business after the election will be an all-out concerted effort to dismantle Social Security and to turn the entire retirement system over to the Vampire Squids.

And it’s all based on lies about government running out of money. Anyone who’s been reading this blog knows that is literally impossible. For those who need reinforcement, one of my UMKC colleagues has just provided an excellent explanation.

Here’s Stephanie Kelton, in perhaps the best interview I’ve ever heard on Modern Money Theory:




JoeFirestoneOctober 31st, 2012 at 3:16 am

That was a great interview by Stephanie. I agree that it was the best I've heard for MMT. Of course, Shearer was very friendly and helpful, asked good questions, and really listened for the answers. I agree antidotes for Peterson's poison are really, really important right now, because of "the Great Betrayal," coming up. Here's another antidote:

absullivan1November 1st, 2012 at 4:03 am

Hi, your post above is excellent and refreshingly candid. Although I have absolutely no interest in making a nuisance of myself, I have many questions to ask MMTers. Stephanie Kelton is listed as the editor of the New Economics Blog. After 'liking' the website and following it on Twitter, I tried to tweet a question to Stephanie Kelton. I did not receive a response, and it may have been inappropriate to tweet her out of the blue. I am sure that all of the professors in your department are overwhelmed with communications of all kinds from all around the world. In fact, I hope you devote most of your attention to students of economics.

As a layman, I am glad to see economists who want to engage with the general public. As a citizen, I am glad to hear people offer bold criticism and suggestions for reform of our economic policies. Your own effort to engage self-identified Austrian economists is intriguing, even if it proves to be unappreciated by most Austrians.

I read that you were selected to serve on Sen. Sanders's Advisory Committee on Federal Reserve Reform. I have a question about your views regarding a statement that was made a few years ago by one of your colleagues on the committee. On 1/8/09, Joseph Stiglitz made the following statement in the Guardian:

Third, a global reserve system is needed. It makes little sense for the world's poorest countries to lend money to the richest at low interest rates. The system is unstable. The dollar reserve system is fraying, but is likely to be replaced with a dollar/euro or dollar/euro/yen system that is even more unstable. Annual emissions of a global reserve currency (what Keynes called Bancor, the IMF calls SDRs) could help fuel global aggregate demand and be used to promote development and address the problems of global warming.

Would you and other MMTers have the same perspective on this proposal as you have on the EMU? Would all of the same factors apply? Would such an international currency function as a foreign currency? I would be very grateful to hear your views on this topic.

L. Randall Wray L. Randall WrayNovember 1st, 2012 at 2:46 pm

I don’t agree with Prof Stiglitz. I see the “bancor” plan as both politically infeasible and unnecessary. It is also undesirable as I do not see anyway to make the international central bank that issues the bancor democratically accountable.

JoeFirestoneNovember 3rd, 2012 at 2:18 am

I write a lot about the political aspects of MMT; but am not myself one of the professional MMT economists. I will, however, attempt to answer your question and leave it to Randy to correct mt answer if it needs it. From an MMT point of view, the important issues isn't whether an international reserve currency replaces the dollar the world's reserve currency. The important issue is whether a an arrangement like the Eurozone arrangement is created where the US adopts that reserve currency as its own and becomes a currency issuer, rather than a currency, or, alternatively whether it pegs the value of USD to the value of the reserve currency. Either way, it would either abandon or constrain its currency sovereignty, a move that would restrict the USs policy space relative to its ability to respond to business cycles with deficit spending. In other words, from an MMT point that kind of move would be self-destructive, if not suicidal.

absullivan1November 3rd, 2012 at 5:16 pm

Thank you, Joe Firestone, for your response. I happened to watch the first two lectures of a seminar that were given by L. Randall Wray and Michael Hudson for the Modern Money and Public Purpose seminar. Someone asked a question about the possibility of a global reserve currency, and Prof. Wray responded. Basically, he said that he saw little reason to believe that a global reserve currency could function properly and fairly for the benefit of all the nations involved in the current political and economic context. He did not bring up the idea of a currency issuer vs. a currency user, but I suppose that he might have if he had had more time. Again, thanks for your response.