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Tuesday, May 7, 2024

MMT Documentary - Finding The Money

There is a MMT documentary now out — “Finding the Money.” I have not watched it yet, as it is on a streaming service I recently dropped. (My family rotates through the various streaming services, so I will watch it once we swap around again.) Obviously, I cannot give any recommendations about it, but it sounds like a good introduction to some of the debates.

Unfortunately there was a lot of howling on X (the everything app) about one aspect: the economist Jared Bernstein had a bad interview based on running into a question that he had not thought much about (I believe it was along the lines of “why would a floating currency sovereign borrow its own currency?”). The unfortunate thing is that there were a lot of activists playing this clip up, which then was picked up by right wing political opponents of Bernstein. This then led to a backlash by liberal-left mainstream types about Bernstein being set up. (From my understanding, other mainstream(-ish) critics of MMT came off better within the documentary.)

Since I have not watched the documentary, I obviously cannot comment on whether the treatment of Bernstein was appropriate. It does indicate poor preparation on his part — I would guess that he did exactly what pretty much every mainstream critic did: just read MMT critiques written by mainstream critics without asking whether those economists gave a good faith description of MMT.

The problem with focussing on the framing of fiscal policy is that it can lead people to lose track of why the framing matters. You need to focus on substantive theoretical differences that led to differing policy analysis. This was much easier in the early 2010s, when mainstream fiscal analysis was utterly terrible. “The United States is going to be the next Greece!”, etc. However, the pro-austerity crowd was thrashed politically, and so it is much harder to determine what exactly the mainstream position on fiscal policy is. You cannot have a debate with a group that has no concrete views.

What people are arguing about now is inflation. And what is the mainstream view on inflation? They assume that higher interest rates lower inflation. However, they are not sure how high that is, since they have no idea where r* is. Have a fun time debating that view!

At present, political debates are about foreign policy and political economy — not raw fiscal policy. Debates about MMT views are largely confined to financial market commentary, where hard money types have an extremely difficult time avoiding being wildly wrong about fiscal policy. Although such debates can be fun, they are a sideshow relative to what is actually happening in the political sphere.

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(c) Brian Romanchuk 2024

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