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First you have to understand what MMT is. All it is, is a fully accurate description of how a modern economy works. The kind of understanding you’d get out of a Krugman, undergraduate textbooks is adequate for introducing basic concepts, provided you realize in the back of your mind it isn’t ’really’ how things work. Once you get out into the real world, you have to jettison much of what you’ve learned throughout school. This is basic applied versus theory. And that’s where MMT begins.
If you want a basic book, Randall Wray wrote a good one a few years ago, but it can follow a steep learning curve if you aren’t already acquainted with basic concepts. If you want to understand where MMT goes wrong, Cullen Roche has a great series of articles on this from the applied, investing world that are very much worth reading. He gets some things wrong, but a lot of what he says is on point.
Hope that helps.
Thanks!
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One of the key insights of MMT is that a country that borrows in its own currency (like the US or the UK, but not individual countries in the Eurozone) can't suffer an Argentina-style bankruptcy because they can always print enough money to pay their bills. MMTers who also understand Econ 201 know that what this means in practice is that the endgame of excessive deficit spending is Zimbabwe and not Argentina, and have some modest but sensible ideas about how this changes the optimal monetary and fiscal policy. In particular, smart MMTers think that deficits matter even less than Krugmanites do as long as there is significant unemployment such that deficit spending isn't competing with the private-sector economy for real resources. MMTers who think MMT is a substitute for understanding mainstream economics think that it means that deficits don't matter ever and that printed money can buy all the real resources you could want from Sugarcandy Mountain.
People ignore the fact that this is what already happens anyway with the national debt and why the “debt ceiling” the way it’s used in view of the public, is alarmism meant to scare people. Congress always rolls over its maturing debt perpetually when payment becomes due simply by printing the money to pay for it. Where people have reason to worry is when fiscal policy (government money printing) becomes so crazy that the government prints beyond the ability for the economy to absorb the excess capacity. Think of it like a bathtub that overflows. That’s when you get phenomenon like hyperinflation.
Deficits “matter,” but they don’t matter in the way people think they do. It’s why a lot of heterodox Post-Keynesians advocate the government running permanent budget deficits. Private money creation is qualitatively different from public money creation in that the latter carries with it the creation of debt with no obligation to repay (unlike banks). When private money creation via the banking system hits things in excess of about 70%, that’s when the economy really starts suffering. This is why MMT’ers advocate a mix of both private and public money creation in the economy. The problem with public (government) debt is that it lacks a sound feedback mechanism to tell you what the appropriate level of money creation should be. In the type of system we have with private banks, banks ‘compete’ for the demand of their most creditworthy customers with more finely grained data on the ground that enables them to better calculate the local conditions within the economy to determine how much money should be lent out. That’s why we view things through the lens of monetary policy so dogmatically. The problem is excess private money creation is extremely dangerous when it gets out of hand.
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