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Modern Monetary Theory (MMT) (Read 142787 times)

thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1395 - Jan 16^th, 2026 at 12:22pm

(Daily Mail)

Karoline Leavitt reveals the thinking behind Trump's call to cancel elections

.......

The article devolves into an argument with a journalist over whether Trump was joking or not; but the final paragraphs point to the real problem:

Both times the president spoke about cancelling the elections he referenced how the midterms typically get won by the party that does not hold the presidency, which in this case is the Democrats.

From 1934 - 2018, the president's party has averaged a loss of 28 House seats and four Senate seats, according to the American Presidency Project.

During the 2018 midterms, halfway through Trump's first stint as president, the House lost 40 GOP seats while the Senate gained two Republican senators.

'It's some deep psychological thing, but when you win the presidency, you don't win the midterms,' Trump told Reuters on Wednesday.

.......

It's not "some deep psychological thing", but the dysfunctional nature of mainstream economics which always results in the President's party disappointing the electors, by the time the midterms arrive.

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Frank

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Re: Modern Monetary Theory (MMT)
Reply #1396 - Jan 16^th, 2026 at 7:55pm

Elon Musk: "People get confused sometimes they think an economy is money , But money is a database for the exchange of goods and services and for time-shifting the exchange of goods and services. Money is a database. Money does not have power in and of itself

You can run the thought experiment: if you are shipwrecked on a remote island and you have a trillion dollars in a Swiss bank account, "it's worthless"

You’d rather have a can of soup. You can have all the Bitcoin in the world and you’re still going to starve

The actual economy is goods and services”

https://x.com/XFreeze/status/2011807966630990247

Estragon: I can’t go on like this.
Vladimir: That’s what you think.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1397 - Jan 17^th, 2026 at 4:10pm

Frank wrote on Jan 16^th, 2026 at 7:55pm:

"The actual economy is goods and services".

Wow.... is Musk searching for something, knowing he is soon to become the world's first trillionaire - while 2 billion people are living in life-threatening poverty?

He might wake up the US - and the world - doesn't have a debt problem, it has a resource management problem.

He would do well to understand the following post (from Prof. Steve Keen) explaining why Neoclassical economists are ruining the economy.

« Last Edit: Jan 17^th, 2026 at 4:17pm by thegreatdivide »

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1398 - Jan 17^th, 2026 at 4:39pm

Prof. Steve Keen explains why Neoclassical economists are ruining the economy, while claiming to be properly managing it. (They claim "TINA - there is no alternative" you see...):

https://profstevekeen.substack.com/p/equilibrium-is-for-dummies?utm_source=post-...

Equilibrium (is) for Dummies

In recent months, there has been a resurgence of Neoclassical economists tweeting about equilibrium, and championing their approach to economics over that of heterodox economists like me. This includes both established academics, and new graduates from undergraduate degrees.

Here’s the “Howard Marks Presidential Professor of Economics at the University of Pennsylvania”, Jesus Fernandez-Villaverde, asserting that anyone who doesn’t know what an equilibrium is—as defined by Neoclassical economics—should be ignored:

(graphs and images in this article are all available at above link)

University of Warwick Professor of Economics Roger Farmer chimed in as well, asserting that “An economic model requires an EQUILIBRIUM CONCEPT”:

At the other end of the economics pecking order, a recent graduate economist opined that “Economics is possible as a scientific study only if the economy has a prevailing tendency to move toward equilibrium”

Equilibrium, equilibrium, equilibrium…

I wondered why this was happening now, and then I realized that we are approaching the 20th anniversary of the Global Financial Crisis. It will soon be 20 years since the most recent spectacular failure of Neoclassical economics—the failure to anticipate the biggest economic crisis since the Great Depression.

Far from indicating where the economy was actually headed—into a severe economic downturn—their models told them that a great year lay ahead. This was Bernanke’s Report to Congress on July 18, 2007—just 3 weeks before the crisis began on August 9, 2027:

"The U.S. economy seems likely to continue to expand at a moderate pace in the second half of 2007 and in 2008… forecasts for the increase in real GDP [are] 2¼ percent to 2½ percent over the four quarters of 2007 and 2½ percent to 2¾ percent in 2008". (Bernanke 2007)

This spectacularly wrong prediction—the rate of economic growth in 2008 was not 2.75 percent but minus 2.5 percent, and the recession he didn’t see coming was the longest in US post-WWII history—was not unique to Bernanke. Virtually all Neoclassical economists were caught completely by surprise by the crisis (Robert Shiller was about the only exception), and for the next decade many posts by Neoclassical economics wondered whether their “Dynamic Stochastic General Equilibrium” models were fit for purpose.

But 20 years later, they’re back selling equilibrium analysis as if the GFC didn’t happen. Their students are falling for it, because they were infants when the GFC hit. They don’t have the experience or the memory to realise that this approach has been tested and failed, and they fall for the apparent but illusory sophistication of the mathematics.

Their predecessors did the same thing after The Great Depression: 20 years after it happened, they revived the equilibrium approach to economics that had failed them in the 1920s. This is despite the most famous Neoclassical economist of the time, Irving Fisher, concluding that equilibrium thinking was the problem:

"Theoretically there may be—in fact, at most times there must be—over- or under-production, over- or under-consumption, over- or under spending, over- or under-saving, over- or under-investment, and over or under everything else. It is as absurd to assume that, for any long period of time, the variables in the economic organization, or any part of them, will stay put, in perfect equilibrium, as to assume that the Atlantic Ocean can ever be without a wave". (Fisher 1933)

Fisher’s criticisms of equilibrium economic analysis in the 1930s were ignored, and ironically, the definition of equilibrium that Fernandez-Villaverde asserts you have to know, and understand, and use today to be worth taking seriously on economics, is Fisher’s definition, which Fisher rejected because it led him into catastrophe in the Great Crash of 1929!

Similarly, Farmer champions John Hicks’s definition of economic dynamics as a sequence of equilibria over time:

"I organize all of my thinking around the concept of *temporary equilibrium theory*, an idea that dates to Hicks’ book ‘Value and Capital’ (and perhaps earlier)".

Clearly, Farmer is not aware that Hicks also rejected the use of equilibrium models in economics. Writing in the early 1980s, Hicks said, in reference to the first major post-World War economic crisis, that:

"We know that in 1975 the system was not in equilibrium. There were plans which failed to be carried through as intended; there were surprises. We have to suppose that … It is sufficient to treat the economy … as if it were in equilibrium… we are accustomed to permitting ourselves this way out. But it is dangerous. Though there may well have been some periods of history, some “years,” for which it is quite acceptable, it is just at the turning points, at the most interesting “years,” where it is hardest to accept it." (Hicks 1981)

.......

Full article available at top link.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1399 - Jan 19^th, 2026 at 5:58pm

The fightback against Neoclassical economics begins:

(Daily Mail)

Anti-capitalist group that threw custard over the Crown Jewels 'plans mass shoplifting at Waitrose'

An anti-capitalist group that threw custard over the Crown Jewels has plans for a 'mass shoplifting at Waitrose'.

Take Back Power (TBP) has vowed to shoplift from high-end supermarkets in the coming months to redistribute the stolen food to the needy, in a protest at economic inequality.

The organisation, which describes itself as a 'nonviolent civil-resistance group', is demanding the UK government establishes a 'permanent citizen's assembly - a House of the People, which has the power to tax extreme wealth and fix Britain'.

Its members pledge to resist the 'super-rich' who are 'driving us towards social collapse'.

The group – viewed as a successor to Just Stop Oil – sparked outrage last year when its members threw apple crumble and custard over a glass case containing the Crown Jewels inside the Tower of London.

The people involved revealed a sign saying 'Democracy has crumbled - tax the rich'. Four people were arrested in the aftermath.

Just days before, Take Back Power activists had emptied bags of manure under the Christmas tree at The Ritz in Mayfair in protest against the 'obscenely wealthy'.

Security guards swiftly removed the protesters after the manure was emptied under the tree.

Among those taking part in the protests were an NHS worker and a former doctor.

At the group's formal launch at Limehouse Town Hall, east London, on Saturday, January 17, founder members set out a strategy for further disruption this spring.

According to the Telegraph, Arthur Clifton, co-founder of TBP and a former prominent JSO activist, told an audience of around 200: 'We have seen that food is locked behind skyrocketing prices. Less and less people can afford less and less food.'

He added: 'We'll be coming down to London in April for a week of action – a massive take-back with 50 to 100 people just going in and clearing out a Waitrose.'

Take Back Power has raised £56,000 in an online fundraiser for its campaigns to 'tackle economic inequality' and impose greater taxes on the rich.

The group said it intended to earmark £26,000 to run public meetings and training in eight cities to 'mobilise new people into action from January to March'.

A further £20,000 will compensate new members who undertake actions, £12,000 will pay for their accommodation, £6,000 their travel costs and £4,000 their equipment.

Mr Clifton, originally from Chiswick, West London, said the group was also planning 'takeovers' of high-end stores in areas such as Oxford Circus.

Clifton grew up in an upmarket West London property and attended Latymer Upper School, one of the top public schools in the country, where annual fees are £30,000.

Clifton's father, Michael, 58, is a boss at international insurance brokers Chaucer, which boasts of having taken £2.3 billion in premiums in 2024.

Records show he was recently living in a £2 million house.

The group has come to prominence in recent months with a series of eye-catching stunts, including throwing custard over the Crown Jewels and dumping manure in The Ritz.

In a statement following the action, the group said: 'Since 2011, the poorest 10 per cent of households have paid a combined tax rate of 44 per cent on their income and wealth gains, while the richest paid 22 per cent.

'Our political class, be it this government, Reform or Tory, serve the super-rich; they do not care about working people.

'That's why we must demand real democracy, with ordinary people at the heart of decision making, through a citizen-led assembly that has the power to tax the rich.'

......

Yes, but given rich individuals think they have the 'right' to live like Kings regardless of all this economic hardship, they will avoid paying increased taxes.....which means the public sector will have to free itself from dependence on taxpayer money - as discussed in a recent post in which I explained to grappler how that could be done:

Debt free public money created by Treasury for the public sector, in conjunction with AI-informed mobilization of the nation's resources, with inflation control and full employment mandated by government, alongside private enterprise motivated by self-interest in 'invisible hand' freemarkets, in which individuals must earn or borrow private-sector interest-bearing money.

Capitalism needs to be confined to the private sector, alongside macro-economic oversight of mobilization of the nation's resources managed by the public sector - aka socialism - as described above, to enable the general welfare.

« Last Edit: Jan 19^th, 2026 at 6:37pm by thegreatdivide »

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1400 - Jan 20^th, 2026 at 12:29pm

Trump is really getting himself into hot water.

He's alienated mainstream economists by wanting to get rid of the reserve bank's independence.

And now he's alienated all his allies by wanting to muscle in on Greenland's sovereignty, against international law.

With the former, he's on stronger ground: the central bank should not be tasked with controlling interest rates, inflation and employment, because these ought to be government responsibilities to achieve the general welfare.

Re the latter: Trump's BOP (Gaza) proposal is evidently an effort to bypass the UN which - with the UNSC veto - is unable to act on ....anything much...

So now the world is working out how to deal with a global emperor....

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thegreatdivide Gold Member Offline Australian Politics<br /> Posts: 14914 Gender:	Re: Modern Monetary Theory (MMT) Reply #1401 - Jan 20^th, 2026 at 4:36pm Breakthrough video on money creation https://substack.com/redirect/20aa712c-bd91-480b-ad39-a4660c216b8a?j=eyJ1Ijoicnp...
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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1402 - Jan 22^nd, 2026 at 9:48am

This is the End of the US Global Monetary System

Steve Keen

https://profstevekeen.substack.com/p/this-is-the-end-of-the-us-global?utm_source...

Jan 21

The US-dollar-based international monetary system will not survive this Presidency.

There is, of course, just one man who is to blame for our current predicament. And that man is Harry Dexter White.

If you’re saying “Harry Who?” to yourself right now, White was the head of the US delegation to the Bretton Woods Conference, which crafted the Post-War international financial system.

It is because of him that the US dollar became the currency for international trade.

It is because of the consequences of that system for working class Americans that Donald Trump is President.

Since the US dollar is used for almost all international transactions, and because the US is—or was—the strongest economy on the planet, the US dollar is significantly overvalued. That makes American manufacturing uncompetitive. This and several related factors have eliminated the skilled blue-collar jobs that were once the backbone of the political support for the Democrats.

As manufacturing declined, the financial sector rose, because the overvalued dollar empowered the financial sector. The Democrats fell for the specious argument that manufacturing was passe, and that services were the future for America, while manufacturing jobs could be offshored to low wage Asian countries. They morphed from the representatives of the working class into the representatives of the financier class.

This was all couched in the language of specialisation and efficiency, but the reality for American workers was the collapse of skilled employment. The manufacturing heartland of America became “The Rust Belt”, leaving its once working class confused, and justifiably angry. They shifted from seeing the Democrats as their protectors to what they had become, the representative of their enemies.

This disaffected and discarded class was easy prey to a Republican Party taking an anti-government line. Trump has just been the most ruthless exploiter of this sense of betrayal felt by much of the US population.

Therefore, Harry Dexter White set the grounds for Trump’s electoral success. Trump himself was not inevitable, but the breakdown of the system that gave rise to him was. Trump is simply accelerating the process by his narcissistic overreach.

The fundamental flaw of the current system is what I call the Curse of Capitalist Empires: any country that creates an Empire in a capitalist world system is undermined when its currency becomes the basis of international trade.

The process is as follows:

No country has ever become an Empire by conquering other countries with imported weapons. A critical step in becoming an Empire, therefore, is creating weapons that defeat its rivals. This requires a strong manufacturing sector;

Once that country becomes an Empire, its currency becomes the basis of international trade within its Empire;

This pushes up the value of its currency relative to its vassals, which weakens the Empire’s manufacturing sector;

One (or more) of the Empire’s vassals (or rivals) develops a strong manufacturing sector, which enables it to construct weapons that enable it to overthrow the Empire;

That once vassal becomes the next Empire, its currency replaces the previous Empire as the currency for international trade, and the cycle repeats.

Becoming the international currency is therefore not a spoil of Empire, but a spoiler of Empires. It is a poisoned chalice out of which the foolish drink, convinced that their temporary ascendancy is eternal. It is not the only reason, but surely is one of the most significant reasons, that the Spanish Empire lost out to the Dutch, the Dutch to the English, and, at the time of Bretton Woods, the English to the American. We are now witnessing the American losing out to the Chinese.

The only way to stop this cycle is to use a unit of account for international trade which is not a national currency. Such a proposal was made at Bretton Woods (Steil 2013; Keynes 1943), but it lost out to White’s imperial insistence that the American Dollar replace the British Pound as the currency for international trade.

If any good can come out of the crazy situation we are in now—with NATO members wondering how to prevent the invasion of a NATO country by another NATO country—it would be that an updated version of that proposal is revived as the basis of a post-Trump international economic order.

The core idea is that a unit of account—and not a currency—is used as the means of international exchange. The unit of account would be administered by an International Clearing Union (ICU) at which all national Central Banks have accounts, and the sum of all these accounts would start at and remain at zero. A country which has a trade or payments surplus with the rest of the world would accumulate a positive balance; a country with a trade or payment deficit would run up an overdraft.

This system would end the Curse of Capitalist Empires, by ending the otherwise automatic overvaluation of the Empire’s currency. Figure 1 shows the overall structure of the system, with the USA and China used for illustration.

Note: all diagrams shown in link.

(cont.)

« Last Edit: Jan 22^nd, 2026 at 10:07am by thegreatdivide »

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1403 - Jan 22^nd, 2026 at 9:58am

This is the End of the US Global Monetary System

(cont.)

National currencies would be used for intra-national trade, as now. These would have to be converted into the international unit of account—which I propose we call the “Terra” (as opposed to Keynes' 'Bankor'), to remind ourselves that we all share the same planet—to buy goods (and services) produced in another country. Figure 2 shows the transactions involved in exports from China to the USA.

The exchange rate between the Terra and national currencies would be set on the basis of the relative exchange rates applying between national currencies when the system was created. The rate would vary over time, based on persistent trends in each country’s balance of trade. A country with a persistent surplus would have its currency appreciate against the Terra, so that it would cost more in Terra to buy its goods; a country with a persistent deficit would have its currency depreciated, to make it cheaper to buy its goods. This could be done by a system within the ICU, or by a market-determined system—though there would be far less trading of national currencies in this system than we endure today.

To discourage large surpluses and large deficits alike, a progressive penalty rate of interest would be charged on both positive (surplus) and negative (deficit) balances above a predetermined threshold, of say 2 percent of a country’s GDP.

The interest charge would then be transferred to underdeveloped nations, replacing international aid. Since Terras can only be used to buy goods from other countries, this would enable underdeveloped nations to buy inputs they need for development from more advanced countries.

This proposal is a slightly modified version of the system Keynes proposed at Bretton Woods (Keynes 1943). Keynes had hoped that the goodwill of Allied governments, after the horrors of the Great Depression and World War II, would lead them to accepting a system with a truly multilateral world order, rather than one dominated by the Empire of its day. Instead, he lost the argument to the shortsighted arrogance of the American delegation.

Could this system come about now? The argument against it since the end of WWII has always been that, with the Post-War goodwill long gone, countries would not be willing to cooperate in building a system that constrained them all. That has been true until Trump. Now, the rest of the world could develop this system to get away from Trump’s ill will.

Carney's speech at Davos is the first inkling that such a reasoned revolt might actually be possible. Personally, I expect that it will take yet more outrages by The Piece (sic) President before there will be global agreement to end the system that gave birth to him.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1404 - Yesterday at 9:35am

Mainstrean economic madness....

According to mainstream economists, the central bank will have to lift interest rates to deal with the last quarter's increased inflation readout.

But the items most responsible are rents and electricity bills; there is evidence raising interest rates puts more pressure on rents because landlords pass higher mortgage costs onto renters.

And electricity: the government is responsible for that item, because mismanagement of the Oz gas industry has resulted in high Oz gas prices, compounded by the elimination of electricity rebates owing to budgetary pressures - which this thread shows are misconceived in the case of currency-issuing governments.

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thegreatdivide

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Re: Modern Monetary Theory (MMT)
Reply #1405 - Yesterday at 2:27pm

Trump's showing some creative thinking, in an attempt to improve his dismal polling before the midterms:

(Daily Mail)

Trump's million-dollar baby plan aims to create a fortune for America's newest arrivals

A new generation of MAGA millionaires.

That's what President Donald Trump is claiming to deliver with his flagship 'Trump accounts,' which will provide children born between January 1, 2025, and December 31, 2028 with a tax-advantaged investment of $1,000.

Provided to newborns by the Department of Treasury, the $1,000 stipend could be built on with up to $5,000 annual investments.

My comment , not sure what the underlined means.....

'If we make maximum contributions to our child's Trump account, the projected value will be nearly $1.1 million by the time they are 28 years old,' Press Secretary Karoline Leavitt said at an event celebrating Trump accounts on Wednesday.

According to data from Bureau of Labor Statistics (BLS) and major financial institutions, approximately 45 to 55 percent of American households are in a financial position to invest $5,000 annually.

My comment: I see - so only around half of families are able to benefit fully from the 'Trump account' scheme, why am I not surprised?......

Leavitt, who carries an annual salary of $195,200, said she would be signing up her daughter - due to be born in May - for a Trump account.

According to the Council of Economic Advisors, under a scenario of average stock market returns for a baby born in 2026, and with maximum contributions, the balance of the Trump accounts for a child turning 18 could be as high as $300,000 and as high as $1.1 million by age 28.

Without any contributions, a child with a Trump account can expect to have $18,000 when they turn 28.

My comment: so the benefits of the 'Trump account' are negligible for the half of US families living paycheck to paycheck.

The venture is backed by scores of private companies and business leaders, including Michael and Susan Dell, Broadcom, JP Morgan Chase, Bank of America, SoFi, Charter Communications, BNY, BlackRock, Robinhood, Charles Schwab and more.

'Over the next 15 years, we're going to put $3 to $4 trillion of wealth into the hands of young Americans,' Trump said at the event.

My comment: yeh - the 'Trump account' is good business for Wall Street and the banks since it encourages investment by Americans regardless of income.

'Under this program, the US government will automatically create a tax-free investment account for every newborn American ... and fund those personal accounts with a seed contribution of $1,000, which will compound and grow over the course of their lives.'

While the administration touts the accounts as a universal ladder to the American Dream, critics argue the $5,000 annual contribution cap effectively transforms a public benefit into a private tax shelter that will exponentially widen the wealth gap between affluent families and those living paycheck-to-paycheck.

The program was supported early on by investor Brad Gerstner, who has touted the accounts as a way to lower the wealth gap in the US.

My comment: how does he arrive at that conclusion?

Parents can enroll in the program, which officially launches on July 4, 2026, using an online portal, the president said.

'Decades from now, I believe the Trump accounts will be remembered as one of the most transformative policy innovations of all time,' Trump remarked.

My comment.......no comment...... Undecided

The president's pitch comes as his administration has struggled with messaging on affordability and inflation.

The latest Daily Mail/JR Partners poll found that a majority, 53 percent, of Americans disapprove of how the administration is handling inflation. Just 33 percent approved.

Further, 51 percent disapprove of the state of the economy, while just 36 percent approve.

Yes, so the questions is: are the 'Trump accounts' just a clever ruse to improve his numbers before the midterms, by reaching out beyond his MAGA base?

« Last Edit: Yesterday at 2:34pm by thegreatdivide »

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