Monetary Realism

Understanding The Modern Monetary System…

One Cure for High Gas Prices is Worse than the Disease

Most people want the government do to something about the high prices of gasoline, but I am not one of them.

Here’s a rerun from 11 months ago: “We know what it takes to get the price of oil down to $40 a barrel.  It takes a global depression. It takes losing 500,000+ jobs a month in the U.S.”

I said this months ago, and it’s still true today. I won’t advocate for an economic recession so we can have lower gasoline prices.

Matt Y points out a good way to think about this is to imagine a Senator saying “I want to make gas cheaper by creating mass unemployment.

 We could use monetary policy to lower gasoline prices. But once you find out the details of what would actually need to be done to lower prices, nobody but Beelzebub himself could be in favor of the plan.

Of course, there are other cures – like finding a miracle source of energy which comes from almost nothing.



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34 Responses

  1. WR says
  2. cig says

    Sigh. Please not the ecat… if this is not a scam, elvis is alive…

  3. JJ says

    “They should be flattered by the fact that people are taking 90% of their work and trying to expand on it. After all, it’s not like I’ve said all of MMT is bunk. Not even close….And in the end, I’ll always credit Scott and Warren for much of what I’ve learned because they taught me….It’s not like I’m not grateful. We just disagree on a few things.”

    Cullen here – MR is more accurately described as being mostly Post-Keynesian. In fact, the parts we disagree with MMT about are the parts additions to the PKE framework that MMT utilizes. MR is an expansion of Lavoie and Godley more than it’s an expansion on Mosler and anyone in MMT. Sorry for the error.

    • Cullen Roche says

      You said it for me. Thanks for keeping a record of comments Phil. It’s very helpful.

  4. JJ says

    “When I first came across MMT my mind was blown… I couldn’t wrap my head around it in a month”.

    • Cullen Roche says

      Calculus was hard for me when I first confronted it, but my hs teacher didn’t pretend that he was the only one who understood it or the facts behind it.

  5. FDO15 says

    You all see Kelton accusing you of stealing MMT over at NEP:

    “Oh dear …. Neil and Dan have expressed disagreement with the MMTers. What lies ahead? Will Neil launch Modern Monetary Liability (MML), pilfering 15 years of academic work and pawning it off as his own? Will Dan jump ship, re-branding an entire body of work as Modern Monetary Manufactured Product (MMMP)? The suspense is killing me.”

    • Cullen Roche says

      Obviously a jab at us. Oh well. It’s too bad that Stephanie is jumping in the mud pit with the others. Before you know it she’ll be calling us monetary retards also!

      Seriously though, if we’re “pilfering” MMT then MMT stole from Knapp, Minksy and Godley. MMT is really just a bunch of old theories wrapped up in one and modernized (quite brilliantly I should add). And since we reject the state theory and the JG then we’re really only stealing from Godley. And to pilfer means to steal things of little value so we didn’t “pilfer” the JG or the state theory because we think they’re wrong or of little value. So we didn’t really “pilfer” anything. If we stole anything we stole from Godley and his insights are enormously valuable. More like grand larceny than pilfering. :-)

      I also love how MMTers act like they have a monopoly on understanding modern banking or the monetary system. As if it’s not self evident that an autonomous currency issuer can’t run out of money or that banks don’t need reserves to lend. MMT does not have a monopoly on these concepts. It would be like Krugman going to Sumner and complaining that he stole the money multiplier from him….That’s ridiculous. MMT’s unique because of its policy agenda. And trust me, no MMRist wants to steal their policy agenda.

      • Tom Hickey says

        Just a word of friendly advice. Be very careful to attribute all prior contributions by others unless it is certain that everyone in the conversation can be presumed to know the sources. Scholars get extremely upset when they feel that their documented contributions are not rigorously cited. It is considered very bad form.

        All scholars know and expect that their work will be used to build on, or even just be explicated by others. They expect rigorous attribution of sources. The same goes for objections, for example, to obviate straw man arguments. In cases that are not abundantly clear to all who may encounter the work, documentation needs to be cited if one is maintain professionalism.

        I’m sure you all know this, but when blogging it is often easy to forget. When writing books and papers the standards are much stricter. but even in blogging, it is good to recognize contributions and specify differences carefully, especially when there is contention.

        • Cullen Roche says

          Tom, I cite Warren and Scott extensively in my primer and in much of my work. You and I both know it’s not common practice to cite blog posts. I am extraordinarily appreciative of Warren and Scott for their efforts in helping me with MMT over the years and I don’t think either of them feel the least bit slighted by me. To accuse us of “pilfering” MMT is absurd though and incredibly insulting.

        • Tom Hickey says

          Jus’ sayin’.

          I have lived a long time in the academic world and have friends who are successful artists, writer, musicians, inventors and others whose stock in trade is “intellectual property.” I have often been amazed at the kerfuffles that I have seen result from real and perceived injury. I have also seen reputations sullied by failure to observe the boundary conditions, not to mention lawsuits. There have often been times that I did not see anything coming until it did. I am not accusing anyone of anything, Just saying to be aware that “intellectual property” is a hot button for a lot of people.

          Not long after one develops something original that gains cachet one finds this out personally. How different people react depends. I have learned from experience to lean over backwards to make sure I don’t step on sensitive toes. When possible, I just ask the other party what they expect.

          There is always the possibility of innocent confusion, of course. Beowulf came up with the platinum coin gambit, for example, but Joe Firestone really got behind the idea. Even though Joe attributed it, some people are going to remember Joe primarily and perhaps even cite him as the originator. That is hardly Joe’s fault, although it is good form to correct misattributions like that if they come to one’s attention.

          Moreover, standards in various venues are somewhat different. No one is going to hold bloggers to the same standard as applies in publications, for example. (BTW, i would say this also goes for overly simplifying for popular accessibility.) But if others are getting excited about the perceived use of their work without sufficient attribution, then it might be more constructive to look into resolving it instead of publicly accusing someone of being over the top. Agains, this is friendly advice based on my experience. Do with it as you wish. I have no idea where SK or others may be on this.

        • Ramanan says

          “Beowulf came up with the platinum coin gambit, for example, but Joe Firestone really got behind the idea.”

          Me between Beowulf and JoeF. 😉 at Marshall’s Longest.

          Anyway I don’t believe its too important but don’t mind at all.

          Plus there are others – but some other day.

        • beowulf says

          What I remember about the Marshall’s Longest thread (other than it was hilarious Marshall Auerback never bothered commenting) was what a pain in the ass you were! You kept asking damn insightful questions that required drilling down into the USC and CFR to answer. I never thanked you for that but in the time since no one has raised an objection that you hadn’t anticipated, it made it easy to recycle my homework. Thanks too for including the link. By the time Wigwam suggested using coin seigiorage to buy back fed-held debt months later I had completely forgotten you’d made the same point.

        • Ramanan says

          He he. It was fun.

        • Tom Hickey says

          As I recall, the platinum coin has specially features legally that beowulf has dibs on, I think. beo, what say?

        • Ramanan says

          Yep, I guess what I was trying to say was that I was involved in the bit too in the idea – you can check it out at Mosler’s Marshall’s Latest. Mint, Federal Reserve, profits etc. But of course no acknowledgement given in any of the blogs on this. Which is fine by me – because I now believe that VJK had some issues with it and I think he is right!

          Another instance – in the latest reply to critics, the MMT gang comes with steps on the movement of funds after the auction and before the payments from the TGA. I think I have never seen this before from them until it was I who pointed out to them. But anyways minor point again.

          But anyhow my general point is that while your discussion with Cullen is between you and him, you chose to lecture on things which MMTers completely violate. Go and figure Billy Blog – not one piece of acknowledgement in the thousands of posts given to Wynne Godley on sectoral balances and stock-flow consistency. It’s true he does it in papers – but NEVER on blogs. Except once during the debate with Keen – that too based on a comment on MY comment. But he gets it wrong – see Q1 on the latest Saturday Quiz! Same with acknowledgement to Basil Moore on his blog.

        • JJ says

          Why do you say he gets it wrong? Please elaborate.

        • Ramanan says

          “We are told that a country is running a small current account deficit and that the private domestic sector is saving overall. However, until we know the relative magnitudes of these balances, we are unable to conclude the state of the fiscal balance.”

          The right answer according to the quiz is False which obviously is incorrect because we are indeed unable to conclude – even though the statement syntax is not right.

          He regularly thinks “saving overall” is “saving net of investment”, which it is not. “Saving overall” is not “these balances”.

          If the private sector is saving and the current account is in deficit, the government can be either in surplus or deficit.

          Of course that leaves open the possibility that the correct answer is false because the question has been worded incorrectly intentionally. But that’s not the case.

          If you don’t mind can you accept this – whether you agree or not – don’t want more discussion on this at least for now. You saw the painful discussions on NEP – as I saw your comment there.

        • beowulf says

          Also do you have a link for VJK’s comments?
          If he’s wrong, you deserve to know. And if he ‘s right, it gives me chance to plug an even better way to sidestep the debt ceiling under current law.

        • Ramanan says

          I guess here though it is possible that it could be spread out over multiple posts. Likely one post only.

          Maybe I should word my previous comment differently. But I don’t know how to say it so I will come back on that sometime.

        • beowulf says

          I can hardly claim ownership right s for words in the US Code (apparently slipped in by Sen. Al D’Amato as a favor to a poker buddy who lobbied for coin dealers). As everyone knows, the only kind of credit I value is the sort that pays for (in the words of my favorite trucker cap) cold beer, hot women and fast trucks. I was posting pseudonymously, so it was all the same to me.
          In fact I told Joe he didn’t have to cite me. Its simply that he’s a very thoughtful fellow that he continued to do so anyway. It was funny, Joe started getting emails soliciting my answer to various questions. After the whole thing took off, someone pointed out that Ellen Brown had written in her book Web of Debt that the govt could pay off its debt by minting trillion dollar coins. if I known that I would have namechecked her.

          But really, I can’t stress enough that Joe took the leading oar on this. As I mentioned on the forum here the other day….
          He carried the ball for months with repeated blog postings and private emails to various people to drum up interest. Apparently he bugged Jamie Galbraith sufficiently that he resigned himself to study the law himself, saw that it was as Joe described and then started his own Firestone-esque email campaign. It was soon after that Jack Balkin, Matt Yglesias, Brad Delong and Paul Krugman, among others, started treating the jumbo coin as a non-crazy (or at least crazy yet also legal) alternative to breaching the debt ceiling. I surmise Galbraith asked them to keep his name out of it, seeing as radio silence was only broken once.

        • Tom Hickey says

          Thanks for the history, beowulf. That was definitely an exciting episode. When it first surfaced, I wrote it off, but how wrong I was — thanks to Joe’s persistence in pushing it, as you report.

        • Cullen Roche says

          I’m a little confused why we would be accused of stealing MMT ideas when we refer to ourselves as “Mosler Monetary Theorists” in our about us page:

          ” Because of this MMRists often refer to themselves as “Mosler Monetary Theorists” due to the enormously positive influence of Warren Mosler and many other MMT economists. We are extremely grateful for this influence and hope that the disagreement, while material, does not distract the reader from the many similarities between the two schools of thought.”

          Do you think Keynes would accuse Krugman of stealing his ideas?

          I should be more precise. MR is more Post-Keynesian than MMT. In fact, it’s the MMT parts of the PKE understandings within MMT that we reject. MR is much more consistent with Godley and Lavoie than with Mosler. Sorry for the error.

        • Tom Hickey says

          Don’t see how this applies. Krugman calls himself a New Keynesian. Would Keynes approve of a combo of New Classicalism and his work or approve of calling it “Keynesian” at all? I don’t know. But the attribution of ideas is prominent.

        • Cullen Roche says

          And we call ourselves something different and attribute the MMT work prominently. It sounds to me like you all are upset that we’re not under the MMT umbrella any longer and looking for reasons to blame us for the outcome….

        • Tom Hickey says

          As I said, take the advice for what you think it is worth, or not. I’m just suggesting, first, that to the degree that both parties to a kerfuffle presume themselves right and the other wrong, then there is no bridge over that gap. I’d rather see bridges built than walls erected.

          Secondly, I’ve already said what I think needs to be said about attribution, which seems to me to underlie this kerfuffle.

          So be it. Thanks for you attention.

        • Cullen Roche says

          Fine. But MMTers shouldn’t be going around accusing people of stealing their work. MMR works from a totally different foundation and comes to totally different conclusions. We agree on things like an autonomous currency issuer can’t “run out of money” and banks aren’t reserve constrained. But those are operational realities. MMTers don’t own those ideas and they certainly didn’t create them. We reject huge parts of MMT like the state theory and the JG so while we’re similar in many regards we are also very different. Those are the parts of MMT that are “crucial” and even “the most important” and MMR rejects them flat out! Some of you are even claiming we’re supply siders and you yourself have accused us of being an entirely different ideology. So make up your mind. We’re either a totally different framework or we’re just stealing MMT ideas. Of course, we both know we’re very different so your accusations are baseless and unfair.

          Regardless, I cite Warren and Scott prominently so I don’t know what the gripe is about. Maybe some of the other economists are mad that they don’t get airtime from us as much as Scott and Warren do (who, I’ll remind everyone, I believe are flat out geniuses and deserving of very high praise). Well, they didn’t teach me MMT so they don’t get credit in my work for it. It is what it is. If you’re upset that bloggers don’t cite people in all their posts then welcome to the internet.

        • geerussell says

          It’s unfortunate when comments take that kind of insulting tone, no party seems quite immune to it.

        • Cullen Roche says

          “Latched on” is not even remotely comparable to accusing people of stealing your work. Let’s not go misconstruing the meaning of words again….

  6. Госбанк says


    Today, the realistic alternative to fossil fuel is nuclear power generation. However, in this country, any meaningful work on improving safety, efficiency and reliability of the nuclear plants was stopped about 20 years ago by the joint efforts of the “progressives”, “regressives”, and the badly educated populace. Instead, we create synthetic CDOs, Facebook, and “social networking” all of which is supposed make our lives better.

    Speaking of progressives, the Massachusetts variety has successfully managed to block wind turbines construction on the Nantucket Sound for 10 years using hypocritical reasons such as migratory bird deaths, danger to the adjacent airfield, Indian sacred tribal grounds, etc whilst the real reason was that the beautiful views from their mansions might be marred by the gigantic rotating propellers. “Green energy” is good, but not in my backyard.

    Speaking of nuclear energy, France generates 75% of its electricity through nuclear plants. Think about it.

    Germany, on the other hand, is a different story. Perhaps, its population education level is approaching this country’s. Who knows ?

    • JJ says

      The major issue for the US populace is petrol prices (for their vehicles)

  7. JJ says


  8. vincecate says

    Am I correct in assuming that MMR would never advocate price controls? It seems simple enough to show that if price is forced down by laws that supply does not equal demand. Basic economics, right?

    • beowulf says

      Depends how the controls are administered. The default option of course is the market system, which rations by price. The govt can choose to ration by other criteria. There may be good or bad reasons to do so (I don’t think Uncle Sam had any choice but to ration gas during WWII or, for that matter, draft men into the army; we may yet have to do both again someday). The real problem is, as PJ O’Rourke once put it, anytime Congress steps in to control the buying or selling of anything, the first thing to be bought and sold are Congressmen.

      I’m a fan of Marty Feldstein’s tradeable gasonline rights– and on a broader scale, Bill Vickrey’s market anti-inflation plan because they allocate resources on an open cap and trade market instead of by congressional earmark.
      That presupposes, of course, that the govt has demonstrated a legitimate need to jump into a market with both feet. As a general rule, I agree with what Arthur Plumbtre said was Keynes’s goal, “to devise the minimum government controls that would allow free enterprise to work.”