HARRY 3 on Nostr: A critique on MMT. From Farrington- Bitcoin is Venice Your critique raises a ...
A critique on MMT.
From Farrington- Bitcoin is Venice
Your critique raises a compelling point about the tension between Modern Monetary Theory (MMT) and traditional views on money. Here’s a breakdown of your argument and where MMT might face challenges in addressing it:
1. Money as a Common-Pool Resource (Your Argument)
• Core Idea: Money isn’t simply a public good that can be created and distributed without consequence. Instead, it represents a claim on a finite pool of real resources and accumulated wealth. If money creation outpaces the productive capacity of an economy or the saved wealth underpinning it, it can erode trust in the currency and lead to inflation or resource misallocation.
• Implications:
• Excessive money creation risks depleting the “common pool” by overstretching resources for current consumption, leaving future generations with fewer productive assets or diminished currency value.
• Money creation that isn’t tied to real productivity (savings, investments, or innovation) risks undermining the economic balance and social cohesion.
2. MMT’s View and Its Potential Weakness
• MMT Premise: MMT asserts that a sovereign issuer of fiat currency can create as much money as needed for public purposes, constrained only by inflation and resource availability, not by saved wealth or deficits. It emphasizes managing real resources over nominal financial limits.
• The Potential Flaw:
• MMT’s emphasis on “creating money as needed” may undervalue the role of intergenerational equity and the need to match monetary expansion with actual wealth creation.
• While MMT acknowledges inflation as a constraint, it may oversimplify how inflation arises—not just from current demand exceeding supply but from longer-term erosion of trust in the currency or systemic inefficiencies in allocating resources.
3. The Role of Saved Wealth and Controlled Use
• Your Point: Money creation should ideally be tied to saved wealth—representing past productivity and accumulated resources. This ensures that economic growth is sustainable and benefits are distributed fairly across generations.
• Why It Matters:
• When money is treated as a “public good” created at will, it risks over-extraction from the common pool without replenishing it.
• Controlled money creation, tied to saved wealth or tangible investments, aligns incentives for sustainable economic development, fostering trust in the monetary system.
• Future generations inherit not just the liabilities of today’s decisions (e.g., debt, inflation) but also the economic structure and natural resources affected by unchecked money creation.
4. Balancing MMT’s Promise and Your Critique
• Reconciling the Views: MMT provides useful insights about the flexibility of monetary policy in addressing unemployment and underutilized resources. However, its critics (including your perspective) highlight the need for:
• Limits on Arbitrary Money Creation: Treating money as a common-pool resource means respecting its value as a claim on real wealth, requiring careful control over issuance.
• Focus on Productivity: New money should be matched by productive investments—like infrastructure, innovation, or education—that expand the economy’s capacity to deliver wealth sustainably.
• Intergenerational Fairness: Policies must consider long-term effects, ensuring that the current generation’s use of money doesn’t unfairly burden future ones with inflation, depleted resources, or environmental degradation.
Conclusion
Your critique highlights an important limitation of MMT: while it emphasizes the flexibility of fiat money, it can overlook the deeper role of money as a shared claim on real resources and accumulated wealth. Treating money as a common-pool resource, rather than merely a public good, underscores the need for discipline and long-term stewardship. The challenge for policymakers is finding the right balance—leveraging monetary tools for present needs without compromising future economic stability or fairness.
From Farrington- Bitcoin is Venice
Your critique raises a compelling point about the tension between Modern Monetary Theory (MMT) and traditional views on money. Here’s a breakdown of your argument and where MMT might face challenges in addressing it:
1. Money as a Common-Pool Resource (Your Argument)
• Core Idea: Money isn’t simply a public good that can be created and distributed without consequence. Instead, it represents a claim on a finite pool of real resources and accumulated wealth. If money creation outpaces the productive capacity of an economy or the saved wealth underpinning it, it can erode trust in the currency and lead to inflation or resource misallocation.
• Implications:
• Excessive money creation risks depleting the “common pool” by overstretching resources for current consumption, leaving future generations with fewer productive assets or diminished currency value.
• Money creation that isn’t tied to real productivity (savings, investments, or innovation) risks undermining the economic balance and social cohesion.
2. MMT’s View and Its Potential Weakness
• MMT Premise: MMT asserts that a sovereign issuer of fiat currency can create as much money as needed for public purposes, constrained only by inflation and resource availability, not by saved wealth or deficits. It emphasizes managing real resources over nominal financial limits.
• The Potential Flaw:
• MMT’s emphasis on “creating money as needed” may undervalue the role of intergenerational equity and the need to match monetary expansion with actual wealth creation.
• While MMT acknowledges inflation as a constraint, it may oversimplify how inflation arises—not just from current demand exceeding supply but from longer-term erosion of trust in the currency or systemic inefficiencies in allocating resources.
3. The Role of Saved Wealth and Controlled Use
• Your Point: Money creation should ideally be tied to saved wealth—representing past productivity and accumulated resources. This ensures that economic growth is sustainable and benefits are distributed fairly across generations.
• Why It Matters:
• When money is treated as a “public good” created at will, it risks over-extraction from the common pool without replenishing it.
• Controlled money creation, tied to saved wealth or tangible investments, aligns incentives for sustainable economic development, fostering trust in the monetary system.
• Future generations inherit not just the liabilities of today’s decisions (e.g., debt, inflation) but also the economic structure and natural resources affected by unchecked money creation.
4. Balancing MMT’s Promise and Your Critique
• Reconciling the Views: MMT provides useful insights about the flexibility of monetary policy in addressing unemployment and underutilized resources. However, its critics (including your perspective) highlight the need for:
• Limits on Arbitrary Money Creation: Treating money as a common-pool resource means respecting its value as a claim on real wealth, requiring careful control over issuance.
• Focus on Productivity: New money should be matched by productive investments—like infrastructure, innovation, or education—that expand the economy’s capacity to deliver wealth sustainably.
• Intergenerational Fairness: Policies must consider long-term effects, ensuring that the current generation’s use of money doesn’t unfairly burden future ones with inflation, depleted resources, or environmental degradation.
Conclusion
Your critique highlights an important limitation of MMT: while it emphasizes the flexibility of fiat money, it can overlook the deeper role of money as a shared claim on real resources and accumulated wealth. Treating money as a common-pool resource, rather than merely a public good, underscores the need for discipline and long-term stewardship. The challenge for policymakers is finding the right balance—leveraging monetary tools for present needs without compromising future economic stability or fairness.