Commentary on Political Economy

Sunday, 5 July 2020


The Foolishness of the Solitary Runner

Here is Kohler playing the cowardly “two-bob each way” bet, now that he has been made aware of how his foolish escapade on Modern Monetary Theory is making him a target for lampoonery”. This is Kohler:

“The good news about MMT is that it’s neither bollocks nor the answer to all our problems — it’s simply an interesting, if challenging, way to look at how government finances work. Not how they could work, but how they do work.”
So now Kohler is hedging his bets: not bollocks, but not a complete answer. Good try, Alan! Then he proceeds:
“In a country with a fiat currency, the amount of money in the system is not fixed — it can be expanded, and usually is, constantly.”
This is complete buffoonery! MMT does not merely say that governments expand monetary mass. Of course they do! What MMT argues wrongly is that the expansion of this mass - makes no difference to the profitability and efficiency of a country’s economy! THAT is “bollocks”!
Now, here is the coup de grace:
“This year, during the pandemic, their assets have expanded by $US8 trillion, which is 80 per cent the new fiscal spending of their combined governments. In other words, central banks have funded most of their government’s coronavirus fiscal support with new money.
What they have not done, apart from a little bit of it by the Bank of England, is to directly pay for fiscal spending by allowing the government to run an ever-increasing overdraft, so the central bank overdraft becomes the government debt instead of publicly issued bonds.
And central banks have bought the bonds on the secondary market, so the new money has had to make a round trip to the same place.
Why not simply fund the spending directly? Because the fiction that all government spending must be financed by taxes or debt is a convenient way of controlling politicians. If the buggers thought there was a money tree they’d be out there all day long with basket and secateurs.”
Now, tell us Alan, please: Why on this sacred earth would there be a need – any need whatsoever – for central banks….”to control politicians” from printing money?

Game, set and match Mr. Belbruno. Thank God Kohler doesn’t teach economics! Or LOGIC!

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