Sunday, March 27, 2011

Krugman says "MMT"

So, Paul Krugman has finally mentioned "Modern Monetary Theory" within the Grey Lady. A bunch of people have commented, including Interfluidity, Dean Baker(!), Corrente/Lambert(?) and probably many more.

So, will this be the crack in the dyke that brings the whole edifice of macroeconomics down? Or will it just vanish down the memory hole like Climategate? My bet is on the latter, but only if Paul stops bringing it up.

12 Comments:

OpenID vimothy said...

"will it just vanish down the memory hole"

Been a bit of that going round recently...

7:28 PM  
Blogger Intrinsic said...

macro had it coming

regards,
Intrinsic Value

12:46 AM  
Blogger Ramanan said...

Winter,

The title:

Krugman says MMT

;-)

9:06 AM  
Blogger winterspeak said...

Ramanan:

Sorry I must be blind. Did I screw up the title?

12:58 PM  
Blogger JKH said...

My comment at Bilbo:

I think the only person to actually get what’s going on here in the last few days is the blogger Winterspeak, who hit the nail on the head with a post of only several lines, titled: Krugman says “MMT”.

That’s the whole point. Empirically speaking, Krugman is quite a bit closer in economics profile terms to being “the center of the universe” than the MMT blog of the same name. I’m sure this observation will not be received warmly by Mr. Mosler, who is a grand master of MMT, with a comprehensive understanding of monetary operations, and fully credentialed and warranted to be so.

But most of economic blogosphere, since its inception, has been obsessed with getting some sort of recognition from this man Krugman – just witness the tragic pathos of the monetarist blog “Money Illusions”, where every second post is a response to something Krugman said, in a desperate attempt to get some sort of recognition from the man himself. (What else could it be?). And there are other regular hangers on who are well known.

To its credit, MMT doesn’t stoop within a light year toward that level of genuflection with regard to Mr. Krugman.

But bear in mind that the man himself has finally engaged. That is important. In that context, he has written periodically on the nature of his time limits and his word limits on individual posts at NYT. For that reason, I would cut him some very small slack, at least in his use of the phrase “deficits don’t matter”, which I suspect has been partly misconstrued as to its real intention. In what way did he actually mean they don’t matter? I suspect he will elaborate further, even adjust, in due course. Adjustment is better than nothing.

That said, what he has written does seem to indicate quite clearly that he doesn’t really understand the operational and accounting aspects of central bank monetary operations. The question now, since he has finally uttered “MMT”, is whether he is willing to learn. We shall see – because now he is invested. I think this is going to be more interesting than some may imagine, and that the main event is yet to come.

4:41 PM  
Blogger Ramanan said...

Winter,

Of course not. You nailed it.

9:17 PM  
Blogger winterspeak said...

For some reason, JKH's comment didn't make it to this page. posted below (and thanks for the kind words JKH!). JKH wrote:

My comment at Bilbo:

I think the only person to actually get what’s going on here in the last few days is the blogger Winterspeak, who hit the nail on the head with a post of only several lines, titled: Krugman says “MMT”.

That’s the whole point. Empirically speaking, Krugman is quite a bit closer in economics profile terms to being “the center of the universe” than the MMT blog of the same name. I’m sure this observation will not be received warmly by Mr. Mosler, who is a grand master of MMT, with a comprehensive understanding of monetary operations, and fully credentialed and warranted to be so.

But most of economic blogosphere, since its inception, has been obsessed with getting some sort of recognition from this man Krugman – just witness the tragic pathos of the monetarist blog “Money Illusions”, where every second post is a response to something Krugman said, in a desperate attempt to get some sort of recognition from the man himself. (What else could it be?). And there are other regular hangers on who are well known.

To its credit, MMT doesn’t stoop within a light year toward that level of genuflection with regard to Mr. Krugman.

But bear in mind that the man himself has finally engaged. That is important. In that context, he has written periodically on the nature of his time limits and his word limits on individual posts at NYT. For that reason, I would cut him some very small slack, at least in his use of the phrase “deficits don’t matter”, which I suspect has been partly misconstrued as to its real intention. In what way did he actually mean they don’t matter? I suspect he will elaborate further, even adjust, in due course. Adjustment is better than nothing.

That said, what he has written does seem to indicate quite clearly that he doesn’t really understand the operational and accounting aspects of central bank monetary operations. The question now, since he has finally uttered “MMT”, is whether he is willing to learn. We shall see – because now he is invested. I think this is going to be more interesting than some may imagine, and that the main event is yet to come.



Posted by JKH to winterspeak.com at 4:41 PM

9:15 AM  
Blogger The Arthurian said...

Two things
1. Check the "comments" link for your blog on your blogger dashboard. I think Blogger revised their "spam filter" because lately I get a high percentage of "false positive" comments that are treated as spam. Maybe you do, too.

2. re: Krugman says...
In "Austerity Games, Here and There" of 30 March, Krugman writes:
"Why? Because the only way the economy can avoid taking a hit from government cuts is if private spending rises to fill the gap — and although you rarely hear the austerians admitting this, the only way that can happen is if people take on more debt."

I'm no expert, but that sounds like MMT to me. Sectoral balances, anyhoo.

ArtS

3:30 AM  
Blogger winterspeak said...

Arthur:

Thanks re: the spam tip. For some reason Blogger thinks JKH is particularly unworthy of publishing. Stupid Google!

Krugman's comment is stock/flow inconsistent. Spending can rise with no increase in debt. Typical.

10:42 AM  
Blogger The Arthurian said...

:) Spending CAN rise with no increase in debt. But in an economy where policymakers think we need credit for growth, spending is not LIKELY to rise without an increase in debt.

I'm trying to understand. I think debt is a stock, and spending is a flow, and the inconsistency is ??

5:51 PM  
Blogger winterspeak said...

Debt is a stock, and spending is a flow. You can have any amount of debt with any amount of spending.

9:50 AM  
Blogger Greg said...

Krugman was specifically talking about the private sector I believe, the user of the currency. If the govt decreases spending then the private sector has three choices, if the economy is to avoid contraction, use up savings, go into debt more or export more.

Krugman is assuming, rightly I believe that people will try to avoid liquidating savings and that exports will NOT increase enough to offset austerity measures in the govt...............thus the private sector WILL take on more debt.

12:07 PM  

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