Modern Monetary Theory

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The Modern Monetary Theory (also: abbreviated MMT , Modern Money Theory or Modern Monetary Economics , abbreviated: MME ) is a movement of Post-Keynesianism .

The theory goes back to the “ chartalism ” of Georg Friedrich Knapp and the concept of “ functional finance ” by the British-American economist Abba Lerner . The financial and the monetary policy should be, according to Randall Wray , one of the authors of the MMT, in public locations, especially at full employment , orient, it is to combat unemployment, recession, inequality and other social ills.

MMT is based on its own analysis of the monetary system . With the help of double-entry bookkeeping , a. the credit creation , the instruments of the central bank and the fiscal analysis operations. The cornerstones of the MMT are the theory of the so-called "endogenous credit or money creation ", according to which banks grant loans against collateral without resorting to savings, as well as the theory of "chartalism", according to which a state only has money in circulation before he "destroys it again through taxes". The balance sheet view with T-accounts and the division of the economic sectors into government, private (households and companies) and external (rest of the world) areas, which goes back to the work of Wynne Godley , are also essential .

Leading MMT representatives are Warren Mosler , Bill Mitchell , Randall Wray , Stephanie Kelton , Pavlina Tcherneva , James K. Galbraith, and Michael Hudson . Even Scott Full Wiler , Fadhel Kaboub , Mathew Forstater and Europe Dirk Ehnts , Andrea Terzi , Günther Grunert and Paul Steinhardt of this mindset be attributed.

history

The beginnings, 20th century

With Full Employment and Price Stability , Warren Mosler published the first genuine MMT article in 1997 in a refereed journal, the Journal of Post Keynesian Economics (JPKE). In this article he argues that, firstly, unemployment is due to an insufficient state deficit (as taxes minus government spending) and, secondly, the "value" of the currency is set by the state's prices. Today's economic policy is geared towards creating unemployment through the central bank's interest rate policy in times of high inflation rates. Mosler criticizes this. The state can eliminate unemployment at any time by acting as an “Employer of Last Resort” (employer of last resort).

This policy measure is now known as a “job guarantee” and a. Endorsed by Bernie Sanders .

According to Mosler's approach, no crisis is so deep that it cannot be overcome by creating money by the state and reducing taxes. Fundamental is the insight that the state, as a monopoly on the currency, does not “finance” its expenditure, but is the creator of the currency. It is its expenses that enable the private sector (households and companies) to pay their taxes.

This insight was u. a. already represented by Georg Friedrich Knapp in 1905 . He opened his state theory of money with the argument that money - in contrast to the monetary value theory of metallism - derives its value from the legal system of the state issuing money (i.e. from the so-called charter):

“Money is a creation of the legal system. It has appeared in a variety of forms throughout history. A theory of money can therefore only be based on legal history. "

- Georg Friedrich Knapp : State theory of money

According to Knapp, the value of a state-issued gold coin does not lie in the inherent value of the gold from which the coin was minted. Rather, coins are the “dead remnants” of the monetary system. This is already clearer with paper money, which no longer even has any material value worth mentioning. Contrary to the metallism argument that paper money is backed by precious metals, all (chartalist) money issued by the state is fiat money , and "[s] state money is recognized by the fact that it is accepted by the state".

One consequence of this view is the realization that at the federal level (it is different at the state level) taxes do not finance government expenditure, but, conversely, the issue of government money enables tax payments. Since the MMT has taken this insight, the school is also described as chartalistic. Their representatives emphasize that the regulations of the euro zone are restoring national governments to the status of states that cannot finance themselves without problems.

21st century

Specialist conferences on Modern Monetary Theory took place in the 2000s at the University of Kansas City in Missouri, most recently in 2016 as the 1st International MMT conference, before the conference moved to the New School for Social Research in 2018 . The first European MMT conference took place on February 1 and 2, 2019 in Berlin at the EBC University and was sponsored by the Samuel Pufendorf Society for Political Economy e. V. organized.

In disciplines such as sociology, political science and law, MMT is also recognized in Germany. For example, the Hamburg sociologist Aaron Sahr wrote a book on “keystroke capitalism”, the Bremen political scientist Wolfgang Krumbein wrote a book on state financing through the central bank, and the Würzburg lawyer Isabel Feichtner an essay on a possible study of money from the perspective of law .

Political proponents of the theory in the USA are mainly located on the left wing of the Democratic Party : Congresswoman Alexandria Ocasio-Cortez declared her support for the MMT, as did Senator and presidential candidate Bernie Sanders , whose economic policy advisor Stephanie Kelton is a main proponent of the theory.

reception

criticism

The US-American economist Paul Krugman criticizes the Modern Monetary Theory as a “recipe for very high inflation, maybe even hyperinflation ” as soon as the situation of the “ liquidity trap ” no longer exists: According to Krugman, a steadily increasing money supply leads to a massive, i . H. in any case disproportionate reduction in the demand for this currency, ultimately leading to the destruction of this currency.

In a working paper of the union -affiliated Hans Böckler Foundation , the Modern Monetary Theory is described as a "polemical policy for times of depression" that lacks economic foundation. In particular, there is no justification for the assumption that full employment and stable consumer prices can be guaranteed by MMT at the same time.

Former Democratic US Treasury Secretary Larry Summers criticizes MMT as a “voodoo economy” that extends some partially valid assumptions to a “grotesque point” beyond the laws of arithmetic. Political concepts similar to MMT are said to be largely responsible for hyperinflation in Latin American countries (including Venezuela). The concern to make fiscal policy more effective and efficient is basically justified, but the MMT is the wrong instrument for this.

John Mauldin describes the MMT as "economically ignorant madness". Andreas Uhlig relates this to the “core sentence that government budget deficits and government debt are no cause for concern, because if government expenditures are not covered by income, they can always be financed by the central bank. No state can go bankrupt if it has its own currency and the debts are incurred in it. With this steep thesis, supporters of the MMT avoid the uncomfortable fact that governments and states can also reach economic limits like private households and companies. "

A study by the University of Chicago Booth School of Business found that none of the leading economists agreed with MMT's core theses summarized there. However, this survey found itself exposed to criticism from some MMT representatives, because they themselves would never agree to the two alleged core theses given there for evaluation, as they were not in line with the MMT.

justification

MMT representatives vehemently reject this and similar criticism. In particular, the thesis of an impending (hyper) inflation is absurd, since the MMT by no means propagates arbitrarily high government deficits, but demands precisely coordinated budget deficits of the magnitude that is necessary to close the expenditure gap resulting from the savings wishes of the non-governmental sector. Measured against this, the government budget deficits should not be too low, because full employment is not possible if the deficit is insufficient, but neither should they be too high, since this would lead to inflation. Inflation arises when nominal expenditure exceeds productive capacities in an economy. MMT representatives also accuse critics of MMT of ascribing allegations to them that no MMT representative has ever made.

literature

  • Bill Mitchell, Randall Wray: Modern Monetary Theory and Practice: An Introductory Text. CreateSpace Independent Publishing Platform, 2016, ISBN 978-1-5303-3879-5 .
  • Dirk Ehnts: Money and Credit: A Euro-Pean Perspective, Metropolis, Marburg 2020, ISBN 978-3-7316-1412-8 .
  • Dirk Ehnts: Modern Monetary Theory and European Macroeconomics. Routledge, London 2016, ISBN 978-1-138-65477-8 .
  • Dirk Ehnts: Modern Monetary Theory and European Macroeconomics , Berlin 2017, in:. Berlin Debate No. 3, pp 89-102, online here available
  • William Mitchell, Randall Wray, Martin Watts: Macroeconomics . Palgrave Macmillan, London / New York 2019, ISBN 978-1137610669 .
  • Randall Wray: Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems. Palgrave Macmillan, London / New York 2014, ISBN 978-1-137-26514-2 .
  • Randall Wray: Understanding Modern Money: The Key to Full Employment and Price Stability. Lola Books, 2018, ISBN 978-3944203355

Web links

Individual evidence

  1. ↑ Rainer Sommer: "Modern Monetary Economics" on the way to the economic mainstream? In: Telepolis . September 9, 2010, accessed October 15, 2019 .
  2. ↑ a b Andreas Uhlig: Modern monetary policy leads to economic madness - the world economy is weakening, the wishes for government spending are growing. New theories and measures are sought. The markets are unimpressed , NZZ February 17, 2019
  3. ↑ General economic accounting: Financial balances - Was-ist-Geld.de. Accessed December 19, 2018 (German).
  4. ↑ What's New in Modern Monetary Theory? A reminder of Knapp's “State Theory of Money” (1) . In: Conclusion - the business blog . January 18, 2012 ( faz.net [accessed October 1, 2018]).
  5. ↑ “The very question is wrong.” Interview with Stephanie Kelton, SZ , No. 288, December 14, 2018, p. 17.
  6. ↑ Rainer Sommer: "Modern Monetary Economics" on the way to the economic mainstream? In: Telepolis . September 9, 2010, accessed October 15, 2019 .
  7. ^ Full Employment and Price Stability on JSTOR. Retrieved December 19, 2018 .
  8. ^ Warren Mosler: Full Employment AND Price Stability. Retrieved December 19, 2018 (American English, freely accessible version of the article without graphics).
  9. ^ The Washington Post. Retrieved December 19, 2018 .
  10. ↑ a b c Georg Friedrich Knapp: State theory of money . Duncker & Humblot, Leipzig 1905.
  11. ↑ Dirk Ehnts: Money and Credit: A Euro-Pean Perspective. Retrieved December 19, 2018 .
  12. ^ MMT Conference. Retrieved December 19, 2018 .
  13. ↑ 1st-international-european-mmt-conference-20199. Retrieved December 19, 2018 .
  14. ^ Hamburger Edition HIS Verlagsges.mbH: Book detail. Retrieved April 16, 2019 .
  15. ^ Wolfgang Krumbein: State financing by central banks! Retrieved December 19, 2018 .
  16. ↑ Isabel Feichtner: Public Law's Rationalization of the Legal Architecture of Money: What Might Legal Analysis of Money Become? In: German Law Journal . tape 17 , no. 5 , 2016, ISSN  2071-8322 , p. 875-906 , doi : 10.1017 / S2071832200021507 .
  17. ^ A radical proposal by Ocasio-Cortez causes a stir Handelsblatt, March 26, 2019
  18. ↑ Paul Krugman: Deficits and the Printing Press The New York Times , March 25, 2011th
  19. ^ Paul Krugman: MMT again The New York Times , August 15, 2011.
  20. ↑ Thomas I. Palley: The critics of modern money theory (MMT) are right Institute for Macroeconomics and Business Cycle Research of the Hans Böckler Foundation , May 2014.
  21. ↑ Larry Summers: Modern Monetary Theory is 'grotesque' Yahoo Finance, March 6, 2019
  22. ^ University of Chicago Booth School of Business : Modern Monetary Theory. In: IGM Forum. March 13, 2019 .;
  23. ↑ Randall Wray: A Conspiracy Against MMT? Chicago Booth's Polling and Trolling , New Economic Perspectives, March 18, 2019
  24. ↑ Bill Mitchell: Fake Surveys and Groupthink in the Economics Profession , Bill Mitchell - Modern Monetary Theory, March 19, 2019
  25. ↑ Éric Tymoigne and L. Randall Wray: Modern Money Theory 101: A Reply to Critics Levy Economics Institute, Working Paper No. 778, November 2013.
  26. ↑ Bill Mitchell: When the MMT critics jump the shark Bill Mitchell's Blog, April 16, 2019
  27. ↑ Dirk Ehnts: Why MMT is not a “left doctrine” Macroscope, March 5, 2019
  28. ↑ Günther Grunert: The Neoclassical Strikes Back Macroscope, April 8, 2019
  29. ↑ Hamburg Open Online University