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.

View all posts by
4 years 10 months ago

“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?

Joseph Laliberté
4 years 10 months ago

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.

4 years 10 months ago

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

4 years 10 months ago

Wray on Godley:

“And I taught him MMT.”


4 years 10 months ago

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

1 4 5 6