Monetary Realism

Understanding The Modern Monetary System…

Things We Never Said…

I am a little surprised by the backlash over the work we’ve been doing on S=I+(S-I).   Several of the MMT founders have been out in force in recent days downplaying our comments and claiming that we think we provided some “smoking gun” debunking MMT (something we never said).  I believe MMTers are overreacting to a critique and what is in fact just a clarification….But let’s set the record straight on a few things since MMR is getting dragged through the mud here on other websites.

MMTer Neil Wilson has accused us of being “supply siders” because we believe the economy should be ultra productive.

What we really say: the economy is made up of producers AND consumers.  There is no such thing as “supply side” being “right” or “demand side” being “right”.  They are two sides of the same coin.  MMR acknowledges the reality that production ultimately plays an important role in helping to grow the coin, but we by no means take the supply side position that supply creates its own demand.  In fact, we broadly acknowledge the powers of government and the fact that the government can help bolster economic growth through deficit spending.  In fact, the very first story here at MMR was about the TC Rule, which currently calls for substantially larger deficits.  So I have no idea where anyone could possibly get the impression that we are “supply siders”….Are we balanced?  Yes.  Do we believe government can be used in very positive ways?  Yes.  Do we believe production matters?  Yes.  Do we believe demand matters?  Yes.  Do we believe in supply side and trickle down economics?  Absolutely not.

MMT Founder Randall Wray later laid into MMR in an interesting piece on the NEP website.  Among the various mischaracterizations:

“Here is what the MMR folks claim about it:
“Hence, our focus on S=I+(S-I) with the emphasis on the idea that “the backbone of private sector equity is I, not Net Financial Assets.” The idea is not novel, but simply clarifies the understanding of the private sector component.”

The equation is attributed to the “brilliant” analysis of some JKH—who is roundly praised by all those at MMR for coming up with the smoking gun against MMT and Godley’s sectoral balance approach.

This is the fundamental MMR equation that proves MMT wrong? The thing in parenthesis is excess or “net” saving. It is supposed to be eye-popping and revelatory, indeed, revolutionary in the deep meaning it exposes. It says that household saving is equal to investment plus the excess of saving over investment!”

The last sentence in the quote he uses is “The idea is not novel, but simply clarifies the understanding of the private sector component.” But then he goes on to argue that we claim to have found the “smoking gun” that “proves MMT wrong”?  This is precisely why this argument has been so blown out of proportion.  A simple clarification is being viewed as something that we never claimed it was.   It’s almost as if Wray didn’t even read the quote he used to prove (?) his point.  The reality is that MMTers have been unclear at times about the sector balances position and it created confusion for many readers.  All we did was clarify the position.  I don’t know why that is a bad thing?  We certainly don’t claim to have debunked MMT over a simple rearrangement of a basic equation….

He later says we ignore private sector debt even though it’s at the very core of the point we’re making here:

““Ok fine. But note that if the household sector continually ran deficits against the business sector (even with the private sector in balance) we could still get into trouble—and get a Minsky-type debt deflation simply because households cannot service their debts to firms. And also note it does no good to go the other way: what if firms went increasingly into debt against the household sector? Yes, they could get into trouble if gross income flows were not enough to service debts.

But MMRers ignore that as they jump to the conclusion that it is perfectly fine if the business sector’s deficit exceeds the household sector’s surplus—so the private sector taken as a whole is running a deficit.”

In fact, private sector debt is the essence of my entire macro framework from the last 5 years – the balance sheet recession.   If anything, MMRists are OVERLY concerned with private sector debt levels.  We have never stated that it’s “perfectly fine if the business sector’s deficit exceeds the household sector’s surplus”.  I find it practically incredible that Wray begins his piece discussing the importance of “fact checking” when it’s clear that he has almost no idea what our positions are and has clearly done close to zero research on what we’ve published.  But he’s lashing out in what reads as a highly emotional and irrational response in a need to defend MMT against any and all criticisms….

Personally, I think the whole MMR vs MMT thing is getting blown way out of proportion.  MMR and MMT disagree on some pretty major points, but in the end we agree on a whole lot more than we disagree about.  That doesn’t mean we’re going to be traveling the same paths together at all times, but disagreements will arise and I just hope that we can discuss these important topics in a way that removes the personal aspects and blatant mischaracterizations so that we can focus on helping readers better understand the monetary system.


Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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130 Responses

  1. AWK says

    Cullen Roche
    I’ve really stopped caring what MMTers think. They burned this bridge and then came back and nuked it. MMTers never wanted to share the spotlight with me so now I am perfectly fine shining it very brightly on them.


    I’m having a bit of a problem reconciling your statement above and those since with this “apology” from you:

    I’ve been reading a lot of posts on other sites about you and MMR and I now understand why you feel unfairly attacked and mistreated. (Since you told me you didn’t want to rehash it and provide links after my inquiry at Pragcap). However, because I see much promise in your future and ability to change things for the better, I’m writing this to you to beg you to find a path above the fray. Learn to be patient and know when to keep your mouth shut or keyboard silent. Don’t assume that any bridges are burned and take no actions to make it worse. Always keep out a hand of peace and reconciliation. If your adversaries want to behave like asses let them. You don’t have to respond to every other slight. Perhaps let your surrogates fight the nasty battles with no upside instead of you, when necessary.

    You’re an impetuous young man and a bit thin-skinned. I’ve seen far worse schisms and fights and people treated worse than you who later healed the breach and later became friends and allies. To be frank, I think sometimes your counterattacks have also been over the top and you get too prickly with innuendo and martyrdom. Your treatment of Joe Firestone above is an example of you far from your best. IMO he clearly put out the olive branch to you and you were pretty cold verging on rebuke, It appears you took a very brutal interpretation of what he said and distorted it into a quotation he never apparently uttered. Bury the hatchet with him and any others where you’ve been so impetuous.

    Remember the saying “the best revenge is living well”. Maybe an even more pertinent saying here would be the best revenge is being proven right. I remember when I was about your age I invented something I thought could save many lives and make a lot of money. I fought to develop this invention against some severe headwinds, in particular, one major Japanese company went out of their way to say the invention would never work and went after me publicly as I sought funding and support. I even discovered some borderline illegal maneuvers on their part and wanted to make a very public spectacle that may have led to lawsuits. I wanted to explode. I was very fortunate to have a wise mentor who helped me navigate those dangerous waters where I would have drowned. He helped me enlist others to neutralize my enemies when necessary while I remained above the fray and developed the invention. Ten years later, it was this very Japanese company in a bidding war that bought my patents. I can’t tell you what an awesome feeling that was and if I’d burned my bridges it never would have happened.

    Cullen, if you haven’t already, please think deeply about what you hope to accomplish with MMR and what type of leadership/ spokesman role you wish to develop in the future. If you just want to have a cool website hashing out some ideas that’s fine. If you want to have a major say in the public arena that enables your influence to profoundly guide public or private education and policy some day that’s a different ballgame. If you’re not sure, don’t foreclose on your future potential by burning bridges and getting drawn in to petty arguments.

    In you, I see the potential to go far. You don’t see me writing similar critiques to Wray or Mitchell because I don’t see them having what it takes to really break through to the big time. I don’t even think Mosler has what it takes (he’s a dull speaker) which is too bad since he’s super sharp and the logical founding leader.

    You’re young, impetuous, and immature. But you’re also very smart, driven, presentable, hard-working, and passionate about what you believe in and I think with some seasoning you will come out on top.

  2. Ramanan says


    Slipped out of my mind yesterday.

    There’s an article titled “Kaldor And The Kaldorians” written by John E King in the book “Handbook Of Alternative Theories Of Economic Growth”

    and he says that Kaldorian policies are sometimes called “supply-side Keynesianism” !

    • Cullen Roche says

      Interesting. I find it humorous how people go all in on supply side or demand side. Even an amateur economist would understand that they’re two sides of the same coin. As if one is the holy grail….Of course, MMTers have gone out of their way to pin us as supply siders and republicans because they’re on the opposite side of the political spectrum and feel the need to marginalize us because they’ve marginalized themselves by being so extreme in their politics….But whatever. I’ve stopped caring what MMTers think. They’re worse than Austrians.

      • Oilfield Trash says

        Economists from different schools behavior towards each other often is boiled down to the following.
        1. Disagree over fundamentals
        2. Argue past each other
        3. Dispute the facts
        4. Fail to communicate because of different assumptions or different definitions of the same terms. This is why in the physical sciences math plays such an important role. The proof that 1+1=2 is accepted by all. S=I+(S-I) goes from a clarification (purpose) to a smoking gun rebuttal of MMT (interpretation).
        5. Impossible to decide best theory by appeal to facts
        6. Academics often talk of bying thick skinned but in reality have very fragile elitist egos. Meaning if you do not have a PHD you cannot play in my sand box.

        When I read the CNBC story and saw

        “The problem with constantly thinking in terms of a consolidated …. If all this just “nets out” to you and is therefore uninteresting, you aren’t really doing economics at all. You are doing something else that may be interesting but it isn’t economics. It isn’t a new economic perspective or heterodox economics or any kind of economics at all.”

        I do not understand how anyone would not think a strong response would not be forth coming. After all John basically told MMT’ers that what they were doing was not economics, which if as an economist you build your career around such things you might take it a little personal causing you to overreact (see note 6).

        • Cullen Roche says

          I’ve really stopped caring what MMTers think. They burned this bridge and then came back and nuked it. MMTers never wanted to share the spotlight with me so now I am perfectly fine shining it very brightly on them.

        • Oilfield Trash says

          Fair enough but just be careful what streams you decide not to pan for nuggets.

          I actually am glad you choose to take this fork in the road. I think the horizontal level is much more dynamic and interesting than the vertical. As I have posted before

          MMT focus on the origin of money might cause some (me included) to ask does it matter, and make a reasonable argument that it is not a important issue; since the limitations relevant for the origin of something (eg, airplane) might not affect what it evolves into (eg, rocket flight).

          Hopefully MMR will be more interested in what Modern Monetary systems have evolved into and less of their origins. Of course understanding the differencing between an airplane and a rocket will require alot of heavy lifting.

        • Cullen Roche says

          Thanks Oilfield. I’ll be careful panning in MMT waters though. I thought the political right was tough, but man. I’ve met a whole new animal in the political left in recent months….

        • Oilfield Trash says

          “Liberals and Conservatives are childlike: they refuse to make trade-offs, since these require analysis, judgment, sacrifice and maturity. Those who want everything packaged into a neat ideological bundle, “liberal” or “conservative,” are often disappointed.”

          We used to be more mature on how we framed our political differences and cared mored about getting it right and less about winning. I remember in the past you could walk down the middle more and not get run over, for now those days are gone. You have to pick a side before you can get into the debate.

        • Cullen Roche says

          Yeah, I guess I am walking down the middle and getting battered by both sides….The right calls me a socialist. And the left calls me a neocon. Cant win. Oh well.

        • Ramanan says

          Luigi Pasinetti wrote in “Keynes And The Cambridge Keynesians”:

          Joan Robinson’s flirtation with Marx is very curious. It has all the charm of a meeting and all the clamour of a clash. She is no doubt attracted by Marx’s general conception of society. She finds in Marx much which she approves of. But she finds his scientific nucleus embedded in and in need of being liberated from ideology. To obtain this, she says, one must work hard. Her writings on Marx are specifically aimed at “separating the wheat of science from the chaff of ideology”. Needless to say, this has caused her a lot of trouble with the Marxists. It should be kept in mind that in continental Europe, discussions on Marx have a long and complex tradition of philological heaviness and ideological passion….

      • Ramanan says

        Yes it was humorous being called supply-sider by Wilson. You explained your position well in your blog.

      • Bob Roddis says

        Oh, come on now. There’s nobody worse than Austrians:)

        • Cullen Roche says

          I actually find you most reasonable Bob. Can’t say the same about all of your colleagues, but it’s unfair of me to generalize. At least you stick to the facts. I don’t know if you get all the facts right (at least in my opinion!), but you do stick to your facts…. :-)

  3. Not an Economist says

    VERY well said…

  4. Not an Economist says

    I had the opportunity to spend a great deal of one-on-one time with my 3 year old daughter last week as my wife recovered from surgery. It was a great time because my daughter and I grew a lot closer (and my wife is doing well). During the week we spent quite a few days at our local parks playing with all the neighborhood kids. As will often happen when kids play together they squabbled, argued and engaged in name calling despite agreeing on the big picture (playing is fun!). I got back on the web today to engage in some adult conversation and found myself back at the park…

    • Cullen Roche says

      It’s funny. I’ve spent 3 years running Pragcap and never run into anything like this in my entire time on the site. And I’ve had some back and forths with the most political people on the planet (or so I thought). I’m generally super tolerant and open minded with readers. Anyone familiar with Pragcap knows that I run a tight ship over there, but try to keep a very open mind and fair approach to commenters. Everyone gets a chance to posit their opinion, but no one is allowed to insult or get out of hand. But being on the receiving end of an MMT attack is like nothing I’ve ever been involved in. Their attack against me following the JG debates (from some of their highest people) was beyond shocking. And frankly, I am ashamed that I’ve engaged them to the extent that I have and dragged myself through the mud….

      Apologies to all who have been forced to read this endless nonsense. Maybe this helps some of you see why we need to distance ourselves from MMT. This is not a healthy way to debate, spread a message and teach. I refuse to be associated with people who approach the world in this manner. And I regret that it’s devolved to this and that I’ve contributed in negative ways. I’ll put the clamps down on the conversations here like I do at Pragcap. This sort of thing can’t happen in the future. Sorry to all the readers out there….

      • Not an Economist says

        “Anyone familiar with Pragcap knows that I run a tight ship over there, but try to keep a very open mind and fair approach to commenters.” – I agree (been a regular reader for more than a year now)

        “Everyone gets a chance to posit their opinion, but no one is allowed to insult or get out of hand.” – I agree

        “This is not a healthy way to debate, spread a message and teach.” – I agree

        “I’ll put the clamps down on the conversations here like I do at Pragcap.” – I look forward to agreeing! :)

        BTW, as you know no one (including me) is “forced to read this endless nonsense”, we come here on our own. I just wanted to share one person’s perspective of how DIFFERENT this site is (feels?) vs. Prag Cap. And for me, not different in a good way. I highly respect the work you have done at Prag Cap and look forward to continuing to visit often.



      • gyges.h says

        I see you editing your comment and I like what you say, but seriously, don’t sweat it. You’re not dealing with antagonist readers. You’re just dealing with antagonist detractors. Cater to your readers. We’ll sort it out. When you see us not getting it or completely misunderstanding, THEN step in. Until then pick your battles. Save your krebs cycles for thinking, not reacting. This goes to you too, MMT.

        • Michael Sankowski says

          This is very good to hear. Thanks.

      • gyges.h says

        Like I said this morning, we’re human and it can be hard not to engage. But for what it’s worth, this–I shudder from calling it a debate–this back-and-forth has been illustrative and illuminating to me, and I’m probably not alone.

        I see you (et al) repeating your points over and over, and it makes me wonder why it’s so hard for someone to get what you’re saying–why it’s necessary for you to repeat yourself especially in terms of the JG. But that is a signal to me that you are challenging some really closely held beliefs. I’m not talking about mere intellectual loyalty, I mean challenging cherished beliefs. Where I do wish in my perfect debate unicorn-land that you wouldn’t engage so often and instead just do what you did above and “talk to the hand” by posting a simple link to the *actual* stated positions, I too am a human and as you know from what I wrote this morning I took that Wray piece as sort of a hit piece (and not just on you but on multiple targets) and that sort of “making it personal” makes it very hard not to respond.

        It’s a fine media line. I inserted the word media for a reason. Suppose you just did not answer the mischaracterizations. Some take that as the old legal tacit of judgment nihil dicit (he who does not deny, admits). Well that’s not good in this sound-bite culture–of which the blog conversations we say would at first glance seem to dispel but on a more panoramic view is seen to be still ‘sound bite-ish’, but where in video media someone might have 5 seconds to deny or suffer the default-admission, here in the realm of words it takes more typing to accomplish the same. A picture being worth a thousand, so to speak. So you have to deny. Or so it seems. All of this is perfectly understandable by a media savvy creature like me.

        But I dare you, and I dare the MMT adherents (and I use adhere in the technical sense) to rise above and just ‘talk to the hand’ and plop the link of positions in. LET US, the reading users, sort it all out. I don’t need you or Wray or anyone in between to sort it all out for me. I find a lot of value in the discourse, even the inflammatory moments, but I’m intelligent enough to sort it out between the lines without you having to “hold the line”. Somehow I think it will be easier for you and the other MMR people to do this than the MMT people, for what to me are obvious reasons. Where you (MMR et al) show willingness to admit the other side, I see far more recalcitrant (sometimes apparently intentionally so) behavior from the MMT folk. To someone like me who pays attention to many levels of the debate, this is also very instructive. So take heart, do what you do, don’t sweat the small stuff, and 100 other helpful maxims that might keep you on course.

  5. p says

    I knew you were going “austrian” from the start. Say it again, please: “I believe that gold is money”…..

    • Ben Wolf says

      I’m sorry but that’s a ridiculous statement. You aren’t here to have an adult conversation, and we aren’t here to humor you.

    • Cullen Roche says

      Gold is money. Then again, my underwear can also be money. Of course, the trouble with money is not in defining what it is, but getting someone else to accept it….

      • AWK says

        I just hope your underwear is clean Cullen. Does currency defacement with streakmarks reduce its value?

    • Cullen Roche says

      Now I know you’re just a troll….see ya Phil.

    • Cullen Roche says

      Here we go again….the standard childish MMT debate tactic. Change the topic, throw in an ad hominem, and make snide comment. Rinse wash repeat. grow up.

  6. p says

    so you know about it already then, ok.

    So Greenberg’s not MMT, given that he would never support the idea of a jg.

    But at least he concedes the basic point from which all MMT ideas essentially seem to stem. Maybe he’s an MMRist then, or part of some other “branch davidian” school of MMT. Maybe he’s an ARMMRist (an Ayn Randian Modern Monetary Realist). Hang on, I think I might buy that domain name before anyone else does.


    • Cullen Roche says

      Ha. Well, I don’t think it takes much to understand that a currency issuer with a printing press cant run out of money. Bob Roddis of Rothbard fame above will tell you this and say it doesn’t matter because inflation is a form of default in Austrian econ….

  7. p says
  8. phil says


    Has everyone seen the video in which Alan Greespan states that the US can never become insolvent because it can always “print money” ?

    According to Greenspan the US has a “ZERO probability of default” .

    That is, according to the Ayn-Randian, gold-standardian, anti-regulationist, free-marketeer commander in chief – the US can always pay any debt that it owes.

    Yes, you heard it from the horse’s mouth. Greenspan is officially an MMTer.

    Strange but true.

    • Cullen Roche says

      He’s been saying that for years. Understanding that a country that issues its own currency can’t run out of money doesn’t make you MMT. After all, Greenspan would never support the JG….

      Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.” (1997)

  9. p says

    Maybe we should just drop it and get back to doing more productive things. Truce. MMR does its stuff and MMT does its stuff. You don’t each call each other bad names or misrepresent each others’ positions. When there is a point to be debated you do so amicably and in a civilized fashion. Agreed?

  10. Jonf says

    Actually, I thought it was quite good. Until his post I had no earthly idea what your favorite equation was all about. I at least have an inkling now. You should be thanking him for connecting those dots. But in the end, I still think it does not really add anything. You should leave it and move on.

    • Cullen Roche says

      Never mind that he misrepresented our position! :-)

  11. Jeremy Mills says

    As a strong supporter of MMT/Post-Keynesian economic thought it has been quite painful to see the whole MMT-MMR debate since I think it has distracted us from the fight against neo-classical economics. My understanding of the disagreement boils down to the following:

    MMT’s sectoral balance equation describes the financial flows that occur during the year from a 30,000ft level. The often cited equation can only tell you so much – like how desires to push spending into future periods (spending less than you earn) can be offset by others who do the opposite (spending more than they earn). In this way I think of the sectoral balance equation as helping one understand how changes to spending flows will impact real economic output and how government deficit spending can help ensure that discrepancies between spending flows and potential output be eliminated. This is of course important but obviously not the whole story. Many more insights are possible by going into the detail that lie behind the sectoral balances but even this process will only get you so far since consumption is excluded (simplified out in the derivation of the sectoral balances equation since consumption cannot be saved by definition) and since being a flow equation it does not directly elucidate stocks (real and financial). The flow equation only shows the current period’s contribution to everyone’s stock (and only the monetized portion at that).

    My interpretation of MMR is that they are not satisfied with the sectoral balance equation, not because they think it is wrong but because it does not detail what they are concerned about – namely the impact of flows on stocks as they correctly realize that stocks (mostly real, some financial) are what provide us with our standard of living. Now I am relatively new to MMT (8 months) and have yet to read all of the main economist’s work but I would be very surprised if the MMT economists do not agree with this. Just because MMT focuses on using all of our resources doesn’t mean they don’t care how the resources are used (beyond functional finance). My guess is that they have chosen to stay at the income flow level (with functional finance guidance for government spending flows) because it makes their argument simpler (getting the mainstream to understand income flows and our monetary system itself is a very important aim) and because going lower can be more akin to microeconomics. My background is more in the micro so I have had no problem with their focus as I was filling in the blanks with my previous accumulated knowledge. However, I do understand why MMR wants a more fully explained economic model, but they are not going to get it if they continue to play with the flow aggregates IMHO.

    To conclude I see MMT’s focus = utilizing all resources while I see MMR’s focus = utilizing most of our resources in the best way possible. I think these two focuses are primarily complementary, with any conflicts (such as the JG/ELR) being the only real source of debate. I have not decided which side I am on with the ELR/JG issue…But I do know that I am not happy to read the common MMT line of “after private sector decisions have been made”. I think public policy has enormous influence on private sector decisions and this is where policy should be focused at first before we turn to direct government spending ideas like the ELR/JG. For example I would like MMT to articulate policies in regards to ways to address market failures in the private sector and tax code problems that contribute to excess savings desires. In one sense I think MMT is too laissez-faire.

    • Oilfield Trash says

      ‘namely the impact of flows on stocks as they correctly realize that stocks (mostly real, some financial) are what provide us with our standard of living.”

      Yes this is the key, and if finance is a flow which can add to the stock of Investment and Investment can provide for an increase in the flow of income; it makes the horizontal level of money much more important to a private individual standard of living than the vertical.

      • Dan M. says

        One area I think deserves attention is the fact that by attaching guarantees and collateral (usually non-financial assets like factories, homes, etc) to financial assets/liabilities you have significantly strengthened the horizontal level to the degree that society continues to value the product coming off the line (whether it be a widget or a place to live).

        Of course, if you have an improperly-regulated horizontal sector, you’ll get things like a housing bubble, but assuming that the financial sector is properly pricing risk and properly managing the fire-hose of credit, you could have a very thin amount of NFA’s servicing this “private money” while the horizontal system stays stable enough to avoid locking up (like 2008) because the underlying production is based on a value-seeking society. Things wouldn’t lock up because we’re not simply playing a game of greater fools with the underlying assets (ie, housing), but actually fundmentally value the production for what it’s worth.

        I think there’s more going on beneath the surface of the horizontal money than we are even realizing now. Like once you contractually attach the horizontal money to the productive non-financial assets of our economy, you’ve rested the horizontal level on a foundation that could drive production/inflation far further and longer than the typical MMT narrative would have you believe. Maybe in the long run it all comes back to the vertical sector servicing all this stuff and taxes giving us motivation to collect dollars, but as Keynes said, “Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”

        • Oilfield Trash says

          Improperly-regulated horizontal sector is what leads to a “Minsky Moment”, due to the rapid esculation of last two types of debt financing: speculative (borrowers can pay interest from income, but need liquid financial markets to refinance the principal at maturity, so defaults rise when liquidity is impaired); and Ponzi (borrowers can’t pay either interest or principal out of income, so need the price of the asset to rise to service their debts and defaults soar when asset prices stop rising).

          This is why the horizontal level of money is more important to a private individual standard of living than the vertical. Ask the guy who bought a home for $400,000 in Vegas and now sees that home only worth $175,000 if he cares much about the goverment (adding NFA), unless he is getting the NFA to reduce his debt.

        • Michael Sankowski says

          Oilfield, Dan M, and Cullen,

          Yep, this is reallllly murky right now and nobody has a good grasp of what’s really happening.

          It’s such a big problem nobody really has the whole elephant – we’re the 7 blind guys describing the elephant of private sector credit.

          “but assuming that the financial sector is properly pricing risk and properly managing the fire-hose of credit, you could have a very thin amount of NFA’s servicing this “private money” while the horizontal system stays stable enough to avoid locking up (like 2008) because the underlying production is based on a value-seeking society. ”

          This is why S = I + (S-I) is important. It gives us a bit more insight into what’s really happening in the world of private money creation. Even better, it forces us to start asking more questions about this area. We might be able to better balance the bubbles if we think about the world in terms of this relationship.

          ” I even see Mitchell’s rationale for wanting a nationalized banking system (though I don’t agree with it). ”

          Me too. It makes sense in one way – we can keep this beast under lock and chain.

          But this totally and completely ignores the internet bubble. Nothing illegal (or not much) illegal happened in the internet bubble. Shares were created and bandied about in leu of cash and bonds to pay for real assets. Anyone remember the AOL-Time Warner “merger”?

          $164bn isn’t chump change. It was about 1.5% of U.S. GDP at the time.

          Then, as Cullen pointed out in another post – the problem with the internet bubble was we allowed the bust to impact the rest of our economy, not that the internet bubble happened.

        • Cullen Roche says

          It’s precisely this fact that is so problematic for MMT’s foundational beliefs. The govt does not have a money monopoly. Instead, the pvt sector wields huge control over the issuance of credit. The govt controls neither supply nor price of pvt credit. Yet MMT claims the govt has a money monopoly and they build this hierarchy argument to show this. The truth is, the pvt sector issues credit totally independent of the govt which renders the money monopoly argument false. I totally agree that the pvt banking system should be regulated more harshly and I even see Mitchell’s rationale for wanting a nationalized banking system (though I don’t agree with it). After all, that’s the purest form of MMT – one vertical component. But MMR doesn’t describe what we want. It describes what we have. And what we have a system where the govt does not have a money monopoly. It delegates credit creation to pvt actors who wield huge sticks over the economy. And in creating this pvt/public partnership they disperse the power of money creation away from the central govt and to the pvt banking system.

        • Ben Wolf says

          I’m not sure that MMT is guilty of ignoring the banking sector’s influence on money, although certain writers on the subject certainly are. Bill Mitchell has written fairly often that the money supply expands in response to credit demand and contracts as the “loan” is repaid. I think the important distinction is that horizontal monetary expansion is temporary and vertical injections are the only reliable source for new net financial assets. I do agree that the role of the banking sector needs to be scrutinized and highlighted to a greater degree than we typically see from MMT literature. Too often it seems to be ignored in discussions of the state theory.

        • Cullen Roche says

          I know MMT doesn’t “ignore” the horizontal. But in order for MMT to successfully “bring the state back to center stage” they have to always rationalize the power of the vertical component. Otherwise their money monopoly argument falls apart and the focus falls back on the pvt banking system and not the issuance of NFA’s from the vertical. I agree that both are hugely important and powerful. I just think we need a more balanced and objective perspective of both.

        • p says

          So you want to bring the banking sector “back to centre stage” ? Does this mean that the “base case” for MMR is a fully horizontal system?

          Oh my god, that’s a total game changer for me. This proves that MMR has it 100% wrong. Because we don’t live in a fully horizontal system, but the MMR “base case” is a fully horizontal system so it must be 100% wrong.

        • Michael Sankowski says

          I literally thought you were being sarcastic!

        • Cullen Roche says

          Phil’s been trolling the last hour or so Mike. His comments have devolved into the usual MMT gibberish and personal attacks. I put him in timeout until he can act like a grown-up.

        • Cullen Roche says

          Where do you people come up with this stuff? I mean, you wonder why MMTers have such a bad reputation and yet you all just continue to engage in these ridiculous mischaracterizations. I have no idea why anyone would align themselves with you or even engage you in debate. I must be a masochist…..

        • Ben Wolf says

          It all tracks back to your emphasis on what IS over what CAN BE. Government could in theory issue additional NFAs into the economy and thereby reduce horizontal monetary expansion by suppressing credit demand or just issue new regulations limiting credit , but this is not something it does as a matter of policy. The policy is we let the banking sector do whatever it wants, giving it de facto power over the money supply.

        • Michael Sankowski says

          I think it’s debatable the issuance of NFA’s will impact much public credit issuance.

          Most public credit is for real estate. So how does this channel – government spending to real estate lending – work? How exactly does increased government deficits reduce the amount of real estate borrowing?

          I can see a case for reduced business borrowing. I can see a case for consumer credit.

          But real estate? Are people going to suddenly start putting down 50% on a house?

        • BT says

          In a booming economy, where there is demand-pull inflation, govt deficits create credit and therefore push inflation higher than it otherwise would be. This causes interest rates to rise in response to higher inflation. Higher interest rates discourage private sector borrowing/credit creation (mainly mortgages).

          In a slump, where there is private sector deleveraging and a lack of demand-pull inflation, govt deficits restore credit growth and GDP growth without triggering higher inflation.

        • Cullen Roche says

          Right. The reality is that we have a pvt banking system that wields huge control. The whole reason we started MMR is because we have a desire to discuss the reality of our system and not project our opinions on what CAN be. Once you understand this perspective you can see exactly why I rejected MMT in the first place….MMTers dream big. And that’s great. But I don’t think we should be mixing what CAN be with what is when teaching others how the system works. And maybe that’s our big difference. MMTers want to change the world through proposing policies. I’d like to change the world by giving people a better understanding of the world they live in so they can use that understanding to make better decisions.

    • Michael Sankowski says

      Yes, Thanks Jeremy.

      We’re trying to make the world a better place and there is so much work to be done.

      ” For example I would like MMT to articulate policies in regards to ways to address market failures in the private sector and tax code problems that contribute to excess savings desires. In one sense I think MMT is too laissez-faire.”

      It’s funny you say this because it seem like there is a certain laissez-faire attitude in MMT to me too. You can see it in the lack of response to the Foreign Sector issues, and even the JG. The JG seems like a throw-your-hands-up approach to the problem of unemployment. “Oh I don’t know – have them all work for the government or something.” It’s something the P-K version of Tyler Cowen would suggest as a solution.

      It leaves out the entire issue of smart resource allocation – we’re trying to address that here.

      Also, there is little or no calculation about how much of a deficit we “should” have at any time. The TC rule isn’t everything to all people, but at least it’s a start.

      Then, there needs to be some awareness of how to deal with private sector credit and equity bubbles .

      We’re not so far from MMT that we couldn’t work together on some of these issues. Working with a few finance guys and prodigy beowulf to round out the knowledge base of the PK/MMT crowd should be frackin’ gold. The PK tradition has approximately zero useful tools for financial professionals in wide use.

    • Cullen Roche says

      Thanks for taking the time to write a thoughtful comment Jeremy. We need more of this. I’ve spent years trying to build a forum for thoughtful discussion at Pragcap and I hope to do the same thing here. Unfortunately, this MMT stuff has really muddied the waters and I’ve dragged myself through the mud in it. Hopefully, we can get back to analysis and both sides can focus on the mission at hand which is eliminating the neoliberal mythology.

  12. marris says


    For what it’s worth, I think your site and analysis are leaps and bounds above that of the “orthodox MMT” camp. You seem to understand both economics AND the modern money system… it’s the best of both worlds.

    I think of orthodox MMT as 1930s macro and no micro-foundations. so you should be proud (and not at all ashamed) that you have those guys huffing and puffing. MMT forces us to think about what is operationally true and what is a useful abstraction (which is really great). But it seems to have attracted all sorts of anti-economic, anti-capitalist cranks who think that it’s some sort of capitalist kryptonite.

    I wouldn’t waste too much time trying to “reconcile” the two systems. Just write what you know and what you learn… operational and economic. Use MMT or supply-side or neo-classical ideas as foils to help you refine your own thoughts and examples.

    • Cullen Roche says

      Thanks Marris. We’d like to embrace all schools of thought where possible. That’s why I am encouraged to see Carney embracing us and Ramanan embracing us. It speaks volumes when an Austrian and a horizontalist will stand by us in defense of what we’re explaining. That’s the sort of balanced perspective we’d like to espouse here.

  13. Schofield says

    No. I remain MMT not really seeing a Minimum Wage as a Weapon of Mass Financial Destruction or Mass New Deal Scheme as a War on Need being a lot different than mass mobilisation for a major war. I’m just not a big fan of government delivery of services having been involved in that for a lengthy period.

  14. Joseph says

    You all sound like an overwrought husband-wife spat. Why not wipe the slate clean and start all over again like adults? Damn academics are always so mean-spirited–petty little people.

  15. Schofield says

    OK. I give up. You don’t want want to answer questions where you stand on who should be doing the money creation. For the record I have reservations about the ELR. In terms of validating my political leanings I try hard to stay in the middle finding Communists and Libertarians too authoritarian for my version of a common good.

    • Cullen Roche says

      Schofield, our position is very clear and it’s described in detail in both the MMR primer and the link I sent to you. I am not here to tell you who “should be doing the money creation”. That’s a political preference that is peripheral to understanding how the system works. I am here to tell you how the money actually gets created and that’s through the vertical and horizontal levels. If you want to say that the govt should create all money through one vertical level then that’s your political leaning and not our reality. I don’t really care what anyone WANTS. I just want you to understand how it IS so you can formulate a better understanding and make more informed decisions.

      btw, if you have reservations about the JG or reject it then you are not MMT. You might want to explore these points some more because I think a lot of people have ended up being confused into thinking that they can be MMT without supporting the JG. Anyone who tells you that is true is misleading you.

      • Joe Firestone (LetsGetitDone) says

        I agree with Cullen on this point. But I also share Schofield’s point on the politics. Treasury should be in control of money creation. I also think the Fed is unconstitutional. It’s a 4th Branch of Government. The Constitution says there are only three. The SC’s been silent on the question, and will probably never decide a case like that until the Executive sues the Congress on grounds of Constitutionality.

  16. Schofield says

    So what’s the big hoopla in separating yourself off from MMT? You are both in favor of government spending. You can agree to disagree over the ELR for a variety of reasons. This is nothing new. Whether ELR ever gets implemented depends upon adoption by political parties who gain power anyway. What you still don’t explain is why you’ve gone all virginal over keeping politics out of economics. Is this because you don’t have a clear line, or policy, on money creation, or are you trying to mask a preference, or are you trying to unrealistically sit on the fence, or do you believe in a half way house solution between public and private money creation? These latter questions I ask are political issues because they affect control of money in the economy. Clarity would help individuals like me to decide whether your hoopla is worth bothering with.

    • Michael Sankowski says

      You must support the JG to support MMT. It’s not something up for debate as far as I can tell.

      It’s the reason we felt compelled to start this site.

      But there is lots of work to be done, so gotta run!

    • Cullen Roche says

      You seem to be suggesting that you can have MMT without the ELR? This is not the case. The JG is MMT’s “base case”. It is “central” to MMT. It is not peripheral. It is not just a policy option. MMT believes the state is the currency monopolist and that a monopolist sets prices. They believe there is involuntary unemployment because the govt does not take a more proactive role in actually setting prices and hiring people. The ELR is not an after thought. It is the essence of MMT and the idea of the monopolist. If you don’t believe in it then you’re not MMT. You’re something totally different. This is all explained in the link I attached and several founding MMTers have clarified this position.

      Personally, I am not here trying to recruit an army of followers. I would like to provide as close to an unbiased and objective understanding of modern money as is possible. I don’t think MMT does this with the best approach because it embeds a policy proposal as their “base case”. So my goal is to put the info out there and the people will either flock to it in an attempt to learn or they won’t. If my approach proves disagreeable then people will not use the info we provide. I know we can’t create a totally apolitical perspective of money or eliminate all biases, but by making it crystal clear that policy is 100% peripheral to the operational understandings we are attempting to do that as best we can.

      If you don’t want to bother with the “hoopla” then I am sure you won’t feel alone. Most people would prefer to validate their political leanings over understanding how the world actually works. It’s confirmation bias and we all suffer from it. But I am trying to eliminate that bias as best I can through a better understanding of the monetary system. Personally, I don’t think you need to understand the ELR to understand modern money so it’s been thrown out the window among other pieces which we believe are false and/or misleading….

    • Dunce Cap Aficionado says

      The ‘hoopla’ is coming more from MMTers than from anyone else. The MMRers have consistenly said that MMT and MMR only disagree on some very specific things, and that very large portions of the two overlap. Meanwhile, MMTers have been relentless in arguing with Mr. Roche, Mr. Sankowski and Mr. Mucha, making Marc Lavoie’s observation about MMTers more and more accurate.

    • Dan M. says

      Correct me if I’m wrong, but it appears that MMT does NOT allow “agreeing to disagree” on the JG/ELR.

      MMT drew a line in the sand. CR stayed on his side and decided to set up his own shop since he was openly being told he’s not part of MMT. I don’t blame him one bit. I’ve had a lot of clarifying conversations on this side of the line.

      I’m sure almost everyone here disagrees on details of what appropriate government safety nets and stimuli should look like. I haven’t heard anything even close to CR or others calling someone “not an MMRist” because they don’t believe in a specific government program.

      • Joe Firestone (LetsGetitDone) says

        Sorry, but I think this an empty claim of open-mindedness for the MMR side. First, I don’t think open-mindedness is at issue here because no MMT person has insisted that the JG will certainly work as advertised or that MMT is certainly correct in stating better results from the viewpoint of public purpose will certainly result from implementing a JG program, and creating an employed “buffer stock.” That this will happen is an MMT “conjecture” in Popper’s sense that it’s a proposition that MMT holds out for testing and falsification. MMR on the other hand, conjetures that “public purpose” will be best served if there is no JG and if we maintain as unemployed “buffer stock.” Indeed, Mike has put forward a target of 4% unemployed and 4% inflation for the TC rule. So, MMT and MMR differ about a central hypothesis. I don’t know any MMT people who say that they can’t be wrong in their conjecture and I don’t know any MMR who are saying that they can’t be wrong. So, as far as I can see either side is equally open-minded and contradicts the other side equally.

        Second, you point out that people on the MMR side of the line are very willing to entertain alternative ideas about how to improve the economy, once we discount the fundamental disagreement MMT over the JG. It seems to me that MMT people are also willing to entertain alternative ideas about how to improve the economy, once the fundamental disagreement is discounted. For example, MMT people differ on the size of the JG wage they advocate. Warren says $8.00 per hour, Randy, Stephanie, and Pavlina all have advocated different JG wage rates. I’ve advocated different JG rates from all the foregoing. No one is being drummed out of MMT for that.

        Earlier, I advocated for using proof platinum coin seigniorage an idea brought to everyone’s attention by beowulf. That idea wasn’t overwhelmingly unpopular among MMTers. And among people who liked PPCS there were many different ideas on its proper use and the face value of the platinum coins that ought to be used. No one was “drummed out of MMT” for these differences.

        In my view, when Cullen said the JG program was unacceptable to him, and others replied that it was core to MMT and then gave their reasons for thinking so, a branch point was exposed. Those who continue to call themselves MMTers do so because they believe that FE at a living wage with PS is at the core of MMT. the people who joined MMR felt differently, and so they gave themselves a different name over this difference of opinion. Big deal! We ought to get over that. We have a core difference of opinion, so now there are two groups instead of one. So what? That happens all the time. There’s no reason for either one side or the other to call the other closed-minded, especially since the issue of whether a fully employed buffer stock gets us closer to public purpose than an unemployed buffer can only be resolved through experience and testing.

        • Cullen Roche says

          You know Joe, it really blows me away that you wrote a 16 part series on pretending to know my positions here and you didn’t even take the time to actually understand them. Randy would be very upset with your “fact checking” skills. In the argument that started this whole debate (between me and Scott on Pragcap, the one in which he called me an ideologue and started hurling insults) I said:

          ” I don’t entirely reject the JG. I think the idea of an employment program as an automatic stabilizer is a fabulous idea. But I am not convinced that a permanent JG program would not have many tangible and intangible negative impacts over the long-term”

          I’ve said it probably 1 millions times in the last few months. The only reason I am against the JG is because I have not seen enough evidence proving that it’s the optimal policy approach. I could be totally convinced that it works. I am not against any policy. But what I am against is taking the monopolist idea and then building an entire theory around it with the idea that the JG is “central” and “crucial” to “understanding modern money”.

          MMR doesn’t reject or stand for any policies. MMR is an understanding of the system. It’s not a policy embedded in a macro theory like MMT….But you have clung on to one or two quotes and taken them totally out of context to build your endless personal attacks. You need to stop misrepresenting what we stand for or claiming that MMR has its own set of beliefs and agendas. We’ve made it VERY clear that MMR is not going to have a set of policy agendas….

          If you guys are going to continue to hurl stones in our direction you need to at least start getting the basic positions right. Otherwise, you’re just doing what you accuse everyone else of doing and creating strawmen that you can then easily blow down….

        • Joe Firestone (LetsGetitDone) says

          Cullen, as you ought to know, the first post here, other than the empty welcome post was this one: dated 02/03/12.

          The posts in my 16 part series were done by 01/25/12.

          My summary: was finished on: 01/31/12

          My short “That’s Not All” post:
          was posted on 01/30/12 in reply to your post of 01/25/12 here: I don’t know exactly when you changed the name of MR to MMR, but at the time I posted my “That’s not All” you hadn’t done that yet.

          TC’s post here: indicates that you revised this: sometime after the 25th and most likely between my posting on 01/30/12 and my comment on on 02/01/12 indicating that change.

          All this is by way of saying that my series predates the first post on the MMR site by a few days. So, I couldn’t very well know your positions “here” given that they weren’t published yet. The portions of my series that criticized your writing, and MR, which later became MMR, are based on quotations from, and links to, your work in December and January. So, I claim to have known your positions based on those posts.

          Since 02/01/12, I’ve not done any posts about MMR, but have concentrated on the WaPo piece, reactions to that by the doves and also a recent piece by John Carney. So, I’m afraid I just haven’t been focusing on what you’ve been saying here except for making a few comments, when I let myself be diverted. So I don’t claim to know your most recent posts, or those of TC and beowulf since the MMR site was started, nor do I know much about the positions you’ve taken in those posts. Unless they are absolutely the same as the positions you took earlier, I just can’t evaluate them right now with reference to the record of what you said since this site offered its first substantive post.

          Above you say:

          “MMR doesn’t reject or stand for any policies. MMR is an understanding of the system. It’s not a policy embedded in a macro theory like MMT….But you have clung on to one or two quotes and taken them totally out of context to build your endless personal attacks. You need to stop misrepresenting what we stand for or claiming that MMR has its own set of beliefs and agendas. We’ve made it VERY clear that MMR is not going to have a set of policy agendas….”

          When I say that MMR favors certain policies or beliefs in my blog posts, I will only do so with reference to quotes from well-known MMR practitioners such as yourself, beowulf, and Mike. I will not offer such characterizations without such quotes. I’ve done that before. You claim above that I’ve misrepresented you. But I have not. The record is clear. Let others evaluate it by going to my posts and deciding for themselves what the truth is.

          Also, for the record, I don’t think my posts have either been personal or endless. As I said, I haven’t posted on MMR for some time. I probably will not do so because my goal is to spread the word about MMT and its point of view, not to debate with you.

        • Cullen Roche says

          Fair enough Joe. So long.

        • Dan M. says


          Here’s where your wrong:

          Several MMTers have specifically stated that the JG is part of MMT… it’s a core concept of MMT, not just some random idea among many random ideas. You even said so later in your post. So saying now that “it may not work as advertised” is a bit much considering that it’s a cornerstone of the philosophy. Do you hear Austrians say, “well the gold standard may not work as advertised?” No… they may be dead wrong but they don’t waft on a cornerstone of their philosophy. MMTers basically pushed CR out for not buying into the JG. MMR appears built to be far more inclusive (and, in many peoples’ observation, more accurate).

          While CR takes issue with a 13 million person jobs program, he hasn’t attached this as a core belief to MMR. You CAN be a MMR follower AND believe in the JG. It’s just one of many policy proposals that may have mixed results.

          A lot of people are noticing that MMR is more open-minded than MMT. This IS a core part of the issue. To say that “both sides acknowledge they ‘could be wrong'” is a complete cop-out for the sophmoric attitude some MMTers have had towards the branching-off. This wreaks of trying to backtrack, reframe the argument, or make peace while maintaining some pride. If it’s the latter, great… I think most people here would rather discuss details about our monetary system than point fingers. MMT has a lot to be proud of… maybe they just got in a little bit over their heads.

        • Joe Firestone (LetsGetitDone) says

          Dan M. I was quite clear in stating that the JG is core to MMT. However, I also said that MMT people are open-minded.

          By that I mean that if the JG doesn’t work, I expect that MMT people would accept the falsification and reformulate their ideas. MMT is supposed to be a scientific approach, not a religion. As far as the Austrians are concerned, I’d simply offer the comment that in my view there’a all sorts of evidence falsifying Austrian Theory. However, they won’t move on.

          From this, I conclude that if Popper, Hayek’s friend, were alive, he’d be among the first to say that Austrian Theory is unscientific because they’ve formulated it in such a way that it isn’t falsifiable.

          MMT says that it views FE at a living wage with PS as essential to public purpose, and that the JG is essential to FE with PS. If it’s proved wrong in stating this, I would expect MMT people to reformulate MMT to take account of that falsification.

          Further, I think that MMR conjectures that JG is not essential to FE at a living wage with PS, and that other means can be used to accomplish. If MMR is proved wrong in that conjecture then I would expect MMT people to reformulate MMR.

          You say that one can favor the JG and still be following the MMR approach. From what I’ve read of MMR thus far. That isn’t so. If you believe that: FE at a living wage with PS is essential to public purpose, and that the JG is essential to FE with PS, then you’re currently in conflict with the MMR approach.

          I hope that my position is clear.

        • Joe Firestone (LetsGetitDone) says

          Cullen in this thread with Dan M. I don’t believe I have linked back to my site, except in my ID information. But even if I had in order to refer people to some arguments I’d previously made, why would that be trolling?

        • Cullen Roche says

          Well, I deleted your 4 links….so yeah, they’re not there….

        • Cullen Roche says

          Oh, and you guys really need to stop claiming that the JG creates price stability. That has to be one of the most unsubstantiated and most misleading claims you all make….

      • Cullen Roche says

        Right. You can’t be MMT without the JG. The founders have made this very clear although Warren seemed to sway on this point at times….The others were resounding in their agreement that MMT cannot be MMT without the JG. And I think that’s accurate. MMT believes in the state as monopolist idea and that leads to the JG proposal. It’s one tightly knit idea. You can’t separate the JG from this and call it MMT.

        Our policies are peripheral to the core understandings. If John Carney wants to say that govt spending might not work then that’s his right. One of the core understandings is that even though the govt can help, they can also be destructive if abused. I am not going to tell him he’s wrong because he’s clearly understood the points we outline. If Ramanan wants to come here and establish his arguments in favor of a focus on banking and the horizontal level then he has that right. The banking sector wields huge power and control over the direction of economic growth. A focus on the horizontal is totally justified based on MMR understandings. I am not going to tell him he’s wrong because he clearly understands how the system works. You’re not “wrong” unless you’re totally misinterpreting the understandings. Like saying that we need austerity right now because we’re running out of money. In that case you’re just wrong and you’re applying a politically charged policy based on a misunderstanding. Personally, I hope we attract a diverse group that end up discussing MANY different policy options rather than one set of policies that are viewed as a holy grail….

        • JK says

          Can one be MMR with the JG? :)

        • Cullen Roche says

          You can be MMR and believe that pigs flying around will make the world better. That doesn’t mean you understood the MMR lessons, but you won’t hear me say you’re not allowed to believe that. :-)

  17. Schofield says

    “Cullen Roche March 5, 2012 at 11:01 am

    You get my point. We’re not against govt spending….”

    Yep. I’m all for pulling teeth too but I like my dentist to tell me how many he/she wants to rip out and a line of reasoning for doing it. Like avoiding septicemia.

    I’m also struggling to work out the reasoning now for this “break-away” web site. Explaining Sectoral Balances correctly? Having a better targetting scheme than the ELR scheme for your government spending? Making propaganda for minimal Libertarian government spending?

    Spending money is political. You do yourself no favors by forcing commenters to drag it out of you.

  18. Joe Firestone (LetsGetitDone) says

    On the subject of “Things We Never Said . . . “:

    “Joe Firestone claims I am a right wring nut job . . . ?

    Sorry, Cullen, I don’t recall saying that. Can you supply the link please?

    • Cullen Roche says

      Joe, your 16 part response to my JG critique consistently framed my comments as “a political slogan” and nothing more.

      • Joe Firestone (LetsGetitDone) says

        Actually, I framed your view as ideological, and as throwing millions of people under the unemployment bus. But “Cullen Roche is a right wing nut job . . . ” isn’t something I ever said. In fact, I consider you to the left of where the political spectrum is today, and not necessarily more right-wing than Paul Krugman or Richard Nixon to invoke one current and one past name. On the other hand, I don’t really think that the left-right frame is very useful today, anyway. I’m not sure where you stand on the corporate-anti-corporate frame, or on the authoritarian-civil libertarian frame. Where do you stand in relation to Bill Black’s views, for example?

  19. markg says

    I think one issue that you and many (novice) MMTers make a mistake on is: “the government can help bolster economic growth through deficit spending”.
    The defict is the budget outcome and represents the public’s desire to net save. Just look at austerity measures. The cut in govt spending should result in a budget surplus. The reality is the cuts cause economic growth, investment, and private sector spending to fall. As a result the deficit goes up. Govt spending increases or tax cuts could spur economic growth to the point where the deficit is small. So please, call for more govt spending or tax cuts, but leave the word deficit out. The deficit will be whatever the private sector wants to save.

    • Dan M. says


      I don’t think there’s too much disagreement with your assertion. However, the desire to net save may drive certain aspects of money, but production comes first, and the horizontal level drives the Investment and production in our economy. Without that, the NFA’s wouldn’t stick. The whole reason that we can “net save” (aka, gov’t can print pieces of paper and increase our net worth), is because that savigns fits into our economy’s ability to run far below productive capacity. Notice you can’t have “productive capacity” without “productive investment.”

      Often, a drought of NFA’s will only manifest itself once an asset-price shock hits. Certainly we’d all agree that housing was over-priced, but it’s hard to imagine that it was overpriced BECAUSE of the economy being starved of (S-I)… so only when the non-financial assets of the private sector (companies and homes, in the late 90’s and mid-2000’s, respectively) were realized to have been way too highly valued did the issue of NFA’s come to a head.

      This indicates that as long as the non-financial assets that are the TRUE make-up of the economy have been properly priced by the horizontal sector, problems don’t tend to manifest themselves in terms of not-enough NFA’s being issued. This implies a much greater role of the horizontal sector than MMT acknowledges, or at least makes clear to readers. This means that simply entering and draining NFA’s from the economy isn’t going to drive inflation to the degree that they may assume, at least in the short-to-medium-term, because they aren’t the driving production to the degree MMT implies.

      Therefore, they see the housing crisis and tech boom as a result of too few NFA’s in the economy… MMR would say that those prices were unsustainable and should have fallen, but that more NFA’s would have simply allowed the rest of the economy to more easily take the blow and move on to other productive activities. However, it would be dumb to ignore all the errors that the horizontal level must have taken to over value those sectors to the degree it did in the first place… which comes right back, again, to MMR’s focus on the horizontal sector.

    • Cullen Roche says

      You get my point. We’re not against govt spending….

  20. Schofield says

    “Cullen Roche March 5, 2012 at 9:48 am

    I was being sarcastic….Come on guys.”

    Yeah! Getting a straight answer here is like pulling teeth !

    • Dan M. says

      Hard to give a straight answer when you don’t ask a straight question… what are you asking??

      Whether something is too political is very subjective. MMR seems to be about as devoid of politics as economics can be, if you ask me. Thinking of the other major groups…. PK and Keynesianism… Schiff and his folks with Austrianism… and MMT lambasting CR for trying to pull out the Job Guarantee and many of their statist implications (I vote democrat, usually; full disclosure).

      I mean are we supposed to discuss MMR and just go silent on whether to spend money in the current crisis because that would be picking sides? No. However, CR nor myself would literally say to a different follower of MMR that they’re “Not MMR” if they’re not for Spending Program A or Tax Cut X. It’s painfully obvious that 1) economics without politics is near impossible, and 2) MMR is coming as close as economics should from ridding political biases from the debate.

      It’s a relatively canned term, and probably slightly puffing their wears, but I think they’re justified in that slogan, because it’s hands-down better than other perspectives on economics around the web. To undersell that feature would be a bigger mistake.

      Further, I think most of the prescriptive discussion that has gone on is as much CR trying to show that he’s NOT an Austrian in MMR’s clothing.

      • AK says

        MMT has “statist” implications precisely BECAUSE of the current design of the monetary system; not because MMTers have a secret desire for it. It is an observation of current reality. MMT’s prescriptions are based on that reality. Nothing more.

        The Job Guarantee is MMT looking at cars driving around with wooden square wheels, and suggesting that things may work better if the government provided wheels that were round and made of rubber. MMR then shouts that the government has no right to interfere with people’s vehicles in that way, and such a scheme overemphasises state power – ignoring the fact that the state has always been the sole provider of the crappy wooden square ones in the first place.

        • Cullen Roche says

          Well, actually, the govt doesn’t have a “money monopoly”, but that’s another story….It delegates most money creation out of pvt banks, but you guys have created this convoluted hierarchy myth to build your state theory around. So no, you’re not looking at wooden cars. You’re looking at Mitchell Island and wondering how we can all move there where there is a single vertical banking component.

        • AK says

          I’ve already mentioned that the job guarantee has nothing to do with a government monopoly on money.

          It has everything to do with the fact that the government ALREADY acts as the employer of last resort when it hands out unemployment payments for a net value-add return of absolutely zero.

          I don’t see how anyone can disagree that the government is already the employer of last resort. Once that is accepted, I think everything else is a rather logical conclusion.

        • Cullen Roche says

          1. The JG has everything to do with the monopolist argument. If you don’t understand this then you don’t understand MMT.

          2. The govt is not the employer of last resort. Temporary and meager unemployment benefits are not the same as offering anyone a potentially permanent $16/hr job with full benefits.

          3. Again, the govt is not the employer of last resort. You’re just conflating a temporary buffer with a permanent one. They’re not marginally different. They’re totally different.

        • AK says

          1) I have provided a pretty clear step-by-step explanation as to why the job guarantee does not require any use of the concept of a “monopoly” (however one chooses to define it). If you disagree, please point out which specific part of my explanation on the JG required “monopoly”.

          2) Functionally, how is that not the same thing? Under welfare benefits, you are given a claim on resources (money) to do nothing. Under a job guarantee, you are given a bigger claim on resources (money + benefits etc.) to do something. As for JG permanence – I have read nothing in any of the MMT JG literature that says you will be given one permanent role forever under the JG. The literature that I’ve read simply says that there will be a pool of jobs available.

          (As a side note on this point, it may interest you to know that in many Western countries such as Australia, it is already possible to stay on steady unemployment payments forever for doing nothing).

          3) The government is perpetually paying out some level of unemployment benefits so the current buffer is not temporary, it’s permanent – it simply fluctuates in size. That is precisely how the JG is designed to work as well – as a transition mechanism to private sector employment. Most of the literature makes that pretty clear.

        • Cullen Roche says

          1) The whole basis of the JG is built on the monopolist argument. I never said the JG “required” the monopolist argument, but that’s how MMT frames it….

          2) UE benefits in the USA pay about 15K a year. The JG would more than double that. I don’t see how the two are all that comparable? And the fact that we always pay UE benefits is not the same as the job being permanent.

          3) The JG would be the largest bureaucratic undertaking in human history. I don’t see how anyone can say it’s just a different version of UE benefits? It’s apples and oranges. But MMTers nonchalantly discuss the JG like it’s just another govt program….

        • AK says

          1) Well if we agree it doesn’t “require” the monopolist argument lets just leave that out of these debates.
          2) I’ve already said that there’s no particular reason why specific jobs must be permanent.

          3) Here is where I feel the crux of our misunderstanding/disagreement is.

          Of course implementing a jobs programme would be a massive undertaking. And thus, like any large human undertaking, it could conceivably fail due to poor implementation. I don’t think any serious MMTer has ever ignored this fact. Even Mitchell has said things along the lines of “the JG may well fail because no-one shows up”.

          But a failure of implementation is not a failure of theory. There are 1001 reasons why an internal combustion engine could fail to operate. Every single one of those reasons has to do with implementation, and none have to do with the theoretical basis of the combustion engine itself.

          Same with JG. The job guarantee is central to MMT not for political reasons, but because of the simple MMT observation that a labour buffer stock is always required in the current monetary system. Following from that, MMT sees a clear advantage in making the labour buffer stock as productive as possible, and hence insists that they should be paid more to do something instead of less to do nothing.

          Like the internal combustion engine, the above thinking is sound. And that is precisely where MMT stops. Implementation could well fail. But MMT says nothing about implementation.

        • Cullen Roche says

          Look, I have zero interest in having this same debate with MMTers once every few months. It’s my opinion that there are enormous holes in the premise for the JG. If you want to read my opinions then see below. But I can’t be having this same debate with MMTers once a week. You guys will never change your stance so there’s no point arguing with you.

        • p says

          Wrong wrong wrong, but you just don’t care

        • Cullen Roche says

          It’s only wrong if you change the definitions to various words like you have done.

    • Cullen Roche says

      Our personal politics and policy options reflect potential options for benefiting from the operational understandings of the monetary system. MMR does not have its own set of politics, beliefs or agendas. It’s an understanding of the monetary system. What users of that system do with that understanding is entirely up to them.

  21. Schofield says

    OK. Here’s my answer.

    Cullen Roche March 5, 2012 at 9:19 am

    “Yes, we’re calling for a trillion more in govt spending and we’re Austerians and Austrians….They will love us.”

    So isn’t that injecting politics into economics? So why the sub-masthead “Economics without Politics” ?

    • Cullen Roche says

      I was being sarcastic….Come on guys.

    • gyges.h says

      You don’t have the sarcasm font installed, do you.

  22. Schofield says

    Yes, we’re calling for a trillion more in govt spending and we’re Austerians and Austrians….They will love us.

  23. gyges.h says

    I’ve read NEP and PragCap along with way too many econ blogs over the last few years. Even though I haven’t read PragCap with much regularity, even I knew that when I was reading Wray’s ‘response’ just how far he was outside his own complaint about fact-checking. I came here just now to find you making describing a very similar reaction. I try not to let things that are obviously about personality annoy to me, because I truly value the push and pull of different opinions and views, and in terms of political philosophy I believe that one of the most important rights is the right to be wrong and not be killed for it, because we can all learn. So I don’t need for us all to get along, I don’t expect us all to agree, I don’t even expect for us all to be civil though it’s nicer but the point is: education and progress will happen anyway even when we don’t.

    …But that piece I just read from Wray… a few words that come to mind are taunting, insulting, condescending. Were it not for the other contributors I value over at NEP that post of his would drive me off for good. While I do value the structure of MMT& MMR above and apart from their various luminaries, as a person with opinions it was hard to read that article and not imagine someone sneering over their keyboard, someone I simply don’t want to know or even hear from anymore. And that bugs me, because I can’t even count how many articles of his I’ve read in the last couple of years. I lost a lot of respect this morning and it’s hard to un-ring that bell.

    Even though I saw some teeth bared in the zillion-comment post when tempers occasionally flared, I didn’t get that same sense of “getting personal” attack from anything I read here. Unlike phil above I don’t read those quoted comments as attacking the ‘core of MMT’ either; that sounds like wounded target talk. Seriously, how many times do you have to say that there is much more in common than not in common before wounded MMT people will stop reacting so painfully to critiques? I read this blog, I welcome the debate, and I still read MMT blogs, and even where I enjoy reading them working it all out over time I must confess that seeing participants agonize over each other gets boring real fast.

    Just do me a favor and keep the conversation going, keep analyzing, and keep thinking–keep up the good work basically–and keep your signal-to-noise filters tuned to avoid this sort of taunting personal attack crap. We’re human and it’s not always easy but I’ll do the same in my own little way, and I’ll even try to keep reading Wray’s words with my filter in place. There’s plenty of room for substantive conversation. I really hope all this crap blows through soon. Thanks again for your conversation, for hosting this place, and for taking the time to read this.

    • Cullen Roche says

      Thanks. I hope it blows through soon because I am tired of arguing with people and would prefer to just focus on what we started this website for – to focus on the operational realities.

  24. Schofield says

    So does the sub-masthead “Economics Without Politics” turn out to be a lie and mask MMR as the home for Austrian/Libertarian/Austerians or not?

    • Bob Roddis says

      MMRists and MMTers don’t know the first thing about even basic Austrian School concepts. And they are proud of it.

      • Michael Sankowski says

        I was wondering when you’d show up, Bob Roddis. How did you even find out about something like MMR?

      • Cullen Roche says


        Your buddy John Carney is in agreement on a bunch of stuff with MMR. What do you disagree with?

        • Bob Roddis says

          So, is this Carney fellow my buddy?

          Just a few little things bother me about MMT and MMR.

          1. The market does not lead to mass unemployment. The Keynesians are wrong. There is no need to “stimulate” the free market or have the government “guide” it.

          2. According to Bill Mitchell, government taxing and spending raises “the spectre of involuntary unemployment”:

          “So it is now possible to see why mass unemployment arises. It is the introduction of State Money (which we define as government taxing and spending) into a non-monetary economics that raises the spectre of involuntary unemployment.”

          3. Fiat money and credit creation ex nihilo distorts the pricing process and distorts the price, investment and capital structure which causes the boom/bust cycle. And “state money” raises the spectre of involuntary unemployment. Get rid of fiat money and government issued money.

          4. Government spending further distorts the pricing process.

          No government “sector”, no worries about balancing against it, right?

          5. Granting plenary economic power to the government is insane because 999 times out of 1,000, it will be abused. It is no coincidence that our present government is Keynesian and is in the process of abolishing the Bill of Rights. “The Road to Serfdom” and all that.

          6. In February, 2011, the American Economic Review (specifically Kenneth J. Arrow, B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow) named its top 20 articles of the last 100 years. Included therein was:

          Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic
          Review, 35(4): 519–30.

          Austrian theory is based upon “The Use of Knowledge in Society”. MMTers act like they have no familiarity whatsoever with the entire topic. Because they don’t.

          7. MMT tries to solve problems that do not exist with “solutions” that are the cause of the problem.

          Other than that…..

        • Cullen Roche says

          Nice Bob. I assumed you and John were acquaintances since I’ve seen you talk before. Sorry if that assumption was wrong.

          MMR disagrees with MMT on their job guarantee. We also disagree with their idea that the state is the “money monopolist”. So you and MMR seem to agree on some of that.

          Where you probably disagree with MMR is on the idea that govt can provide good for society. Maybe we just have a bit more faith in our fellow man. Though I do totally agree with you that govt can be ripe for corruption and it’s one of the main reasons why I think MMTers are overly confident with their job guarantee….

          Are you in favor of zero govt?



    • Michael Sankowski says

      The number is probably closer to $2T. Ron Paul has already reached out and wants to publish us in his new newsletter.

      • Dunce Cap Aficionado says

        Seriosuly!?!?! If you could Mr. Paul to at least listen (which he seems much more likely to do than others…) I would have someone running for President this year that I could actually bring myself to vote for.

        Other than his gold-standard based views of our monetary system, I would be 100% behind him.

        • Michael Sankowski says


          Ron Paul is a strange guy and I could never vote for him due to his association with really racist people.

          Some of his positions are interesting but other ones are downright batty. He’s a bit too crazy for me.

      • gyges.h says

        Krugman will want in on it too but only if you breach 10T.

        • Michael Sankowski says

          lol – he might. He’s been known to bring out the dead horse Government Budget Constraint now and then.

    • Cullen Roche says

      Yes, we’re calling for a trillion more in govt spending and we’re Austerians and Austrians….They will love us. :-)

  25. phil says

    Seeing as the point about MMT and private sector saving/private sector net saving appears to be clearer now (people aren’t talking at cross purposes so much now it would seem), it might be a good time to clear up the currency/money monopoly question raised by Cullen. Rather than creating an incendiary blog post followed by pages of irritated rebukes it might be best to simply lay out the MMR argument (bank credit is important, etc) alongside a clarification of what the MMT position actually is or means. The best way to do this would be to get a direct explanation from an MMT academic rather than going through a long blog debate with all and sundry. Once the positions are clearly presented at the outset it might be possible to have a productive debate, instead of degenerating as usual into a slanging match.

    • Michael Sankowski says


      Remember one goal goal of MMR is to push the awareness of how money works into the mainstream conversation. I am glad we’re getting a bit of response from academics even if it is ranting and not review. But in the end, we want more growth, not more words or equations.

    • Joseph Laliberté says

      I asked Warren Mosler about the monopoly issue at Winterspeak, check the comments thread at

  26. phil says

    “We certainly don’t claim to have debunked MMT over a simple rearrangement of a basic equation….”


    “MMT’s design to bring the state back to “center stage” is wrong. There’s no “money monopolist”. There’s no “Without a government deficit, there would be no private saving.” There’s no rationale for setting prices. There’s no rationale for the job guarantee. That’s the whole point. When you visualize the picture correctly (which S=I+(S-I) helps you achieve) you can easily connect the dots on all of this and see why MMT’s desire to bring the state “back to center stage” is wrong. But honestly, we’re not trying to convince MMTers nor do we even want to convince MMTers. We’re just trying to present a more realistic version of the way our monetary system works.”

    Firstly, MMT doesn’t “desire” to bring the state centre stage, it argues that as the currency issuer it already is centre stage – so it has to do its job properly if it is to provide maximum benefit the private sector.

    Secondly, in this short comment you stated that MMT is wrong on four basic counts, that it presents an unrealistic version of how the monetary system works, and that the equation S=I+(S-I) makes this clear. So how are MMTers supposed to react to this, Cullen? Are they supposed to say, “that’s a good point, thanks for clarifying that for us”? Of course not.

    You attack MMT one minute, and then the next minute you complain when people respond in kind. You say that MMT is completely wrong one minute, and then say that you “were just clarifying things” the next. How do you expect people to react?

    • Cullen Roche says

      Precisely my point. As if MMT doesn’t have anything wrong? And when someone claims you do have something wrong you assume we’ve gone and shot a nuclear bomb in your camp….You’ve strung together about 6 different conversations there, none of which claimed to “debunk” MMT. Did I say MMT was wrong on some things? Yes.

      I think it’s rather humorous how you all claim everyone else in the macro world has it all wrong and they generally respond fairly well to the criticism. But as soon as someone says MMT has something wrong they’re an “ideologue” or something…

      And you didn’t think they had the entire world of macroeconomics solved did you? Or maybe you all do?? Maybe that’s the problem here. Do you actually think you’ve taken an unsolvable puzzle and solved it?

      And yes, Kelton specifically states that MMT “brings the state back to center stage”….But we don’t live in a truly state money system, so how is that not wrong? Even you have agreed that the state does not have a “money monopoly”?

    • Joseph Laliberté says

      Agree with Phil here. I have enjoyed reading JKH on the saving and investment issue, and did learn new things (probably that MMTers were already aware of these things that were “new” to me). What has been a complete turn down for me is why a different intepretation or a new perspective on things should become: “MMT’s foundation is totally wrong”. This kind of blanket statement and the carpet bombing of MMT that Phil alludes to, do not reflect well on any of the guys associated with MMR.

      • Cullen Roche says

        So let me get this right. Scott calls me an “ideologue” on Pragcap back in early December (the comment that sparked this entire fight), Tom Hickey piles on calling me an “ideologue”, Wray calls us “monetarily mentally retarded”, Neil Wilson accuses us of being “supply siders”, Joe Firestone claims I am a right wring nut job and this all reflects poorly on us? Some of you seem to have no idea how this all started. I said the JG involved substantial risks and that I couldn’t support it because of the unknowns. And Scott got all personal and attacked my politics claiming I was 100% ideology and being a neocon or something. And then when I defended myself I was plastered all over MMT websites as some horrible person. I think we need to remember that this started as a very small and reasonable disagreement that exploded because MMTers respond to every little criticism the same way they always do….by making enemies out of people who should be allies. I mean, Scott stabbing me in the back in public over a minor disagreement was just unbelievable, but you guys do this to everyone who has even a minor disagreement with you….The worst part is he was emailing me in private saying I was right and then went on attacking me in public time and time again!

        Where are all the MMTers calling out their own people for what has become endless personal attacks and a very immature response to what has generally been a pretty reasonable set of criticisms?

        I am not sure there is any point in engaging you all on this because the MMT response is always the same.

        • Scott Fullwiler says

          You perhaps don’t recall that you said a little while back that you were not “pinning” this on me.

          Look at this–
          then this–
          Then this–

        • Cullen Roche says

          Scott, you said I was “attacking” MMT. But the reality is that this all started because you stabbed me in the back on Pragcap due to my totally reasonable and rational response to the JG. You even emailed me saying my position was “right”. But then you continued attacking me in public. I am not hiding how this all really played out and your attempt to twist the truth on other sites is absurd. I never attacked MMT. You lashed out and attacked me because I disagreed with you on the JG. If you want to rewrite history then go for it. But the truth is, this whole thing blew up because you got emotional and attacked me in the December 7th back and forth. Go back and read the comments there and see how tempered and reasonable my responses to your attack were. I said:

          “I don’t entirely reject the JG. I think the idea of an employment program as an automatic stabilizer is a fabulous idea. But I am not convinced that a permanent JG program would not have many tangible and intangible negative impacts over the long-term.”

          You then went off the rails and accused me of not substantiating my claims, not providing sources for claims (which I did) and then you accused me of being an ideologue. My responses were all tempered and I was literally floored that someone who had supported my efforts for 2 years was suddenly very publicly attacking me. But this seems to be part of the MMT deal. You either buy MMT with all its baggage attached or you’re an outsider who gets bulldozed by the MMT comment wrecking crew….

          And now things have spiraled out of control and you don’t like what you started. You’ve tried to play both sides of this debate in private and in public. But please don’t try to change the facts about how this all played out and claim that we started attacking MMT because a big part of this is due to your initial response to my JG criticisms….You attacked me, I defended myself and here we are. There’s no hiding these facts….

        • Scott Fullwiler says

          So, you didn’t mean it when you said this in the link to heteconomist above: “Scott, I am not “pinning” this on you so I am sorry if you take my comments as such. I think you’re brilliant and I’ve told you that before so it’s not my intention to pin anything on you. If anyone is to blame for starting all of this, it is me. I accept full responsibility for it. But I don’t think that what I’ve done is necessarily wrong because it highlighted a real issue within MMT. “

        • Cullen Roche says

          Well Scott, this weekend you tried to “pin” this whole thing on us claiming that we were “attacking MMT”. But the reality is that this all started after I laid out a reasonable criticism of the JG and you attacked me as an “ideologue”. You even admitted you were wrong to do it later in the comments and in email. But here we are again with you making false claims and trying to twist them to make us look bad and eliminate any accountability from the MMT side, which, not surprisingly, is almost always the side that inflames all of these petty little internet fights. Just look at all the bridges you guys have burned in your path due to your inability to rationally respond to criticisms….You’ve made enemies out of people who should be totally on your side….And for what? So you can go around pretending MMT is flawless?

  27. FDO15 says

    Wray’s writing style is sophomoric. To point of being unreadable.

    • Ramanan says

      Wray on Godley:

      “And I taught him MMT.”


      • gyges.h says

        And you’d have missed that entirely if I hadn’t taught you to read.