Thursday, July 14, 2011

If a money tree falls in an MMT forest

, but no one hears it, does it still pay the wages for all the laid-off teachers and firemen?
Modern Monetary Theory (MMT) says that for a powerful nation like the United States or Europe as a whole that pays its bills with money that it issues itself, balancing the budget does not matter in the way that it does for an individual or a family or a city or a state or a company. It says that to take what makes sense for a family and to apply it to a money-issuing nation is incorrect. Much empirical evidence (= actual past experience in the real world) suggests that MMT may well be correct and that the orthodox emphasis on balancing a national budget is definitely wrong and often harmful. Sometimes very harmful. As in "cause the Great Depression and lead to WW2" harmful.
Most followers of MMT will also point out that making this mistake gives a lot of money and power to certain people at the expense of others.
But even if MMT is true, if not only the elites who benefit from the balanced-budget illusion, but even most of the ordinary people whose lives are harmed by it believe that illusion, then maybe even if MMT is true, it does not matter.

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