What’s With All the Co MM o T ion ? Dispelling MM y T hs & Pro MM o T ing What MM a T ters

1. What’s With All the CoMMoTion?Dispelling MMyThs & ProMMoTing What MMaTters Scott Fullwiler University of Missouri-Kansas City & Global Institute for Sustainable Prosperity 3rd International MMT Conference• Stony Brook University • September 27-29, 2019

2. Outline • Don’t @ Us with Your MV=PY • Don’t @ Us with Your Phillips Curves • Don’t @ Us with Your Low Unemployment Rate • You Like Price Controls and You Cannot Lie • Who Blinks First? • Conclusion

5. “…[A] point I’ve also tried to make: the irrelevance of ‘helicopter money,’ and in particular the irrelevance of the decision to finance budget deficits by printing money as opposed to selling bonds.”

6. “There is absolutely no economic difference between the two forms of financing. In the first case (where investors buy the bonds) the Treasury pays interest …. In the second case (where the Fed creates money), the Fed pays exactly the same interest…. The crucial point here is that there’s no need to employ helicopter money ….”

7. “Either helicopter money results in interest rates permanently at zero … or else it is equivalent to either debt or to tax-financed government deficits, in which case it would not yield the desired additional expansionary effects.”

9. Summarizing … • ALL deficits raise net financial assets + income of the private sector regardless how they are ‘financed’ • Choice to issue bonds or not is about how to set the central bank’s interest rate targetNOT how to ‘finance’ a deficit • 'Doing' MMT isn’t ‘printing money’ ... even the neoclassical model + operations agrees that’s not a thing • A monetary sovereign'sability to ‘print money’ is the ability to incur deficits, however financed, while the interest rate on the national debt remains a policy variable

12. “[T]he barriers to new ideas like helicopter money or Modern Monetary Theory—which say monetary policy should bankroll more government spending—are higher in Europe than almost anywhere else.”

13. Outline • Don’t @ Us with Your MV=PY • Don’t @ Us with Your Phillips Curves • Don’t @ Us with Your Low Unemployment Rate • You Like Price Controls and You Cannot Lie • Who Blinks First? • Conclusion

15. The Federal Reserve's Review of Its Monetary Policy Strategy, Tools, and Communication Practices Vice Chair Richard H. Clarida • “[A] key development in recent decades is that inflation appears less responsive to resource slack” • “[T]he strengthening of the labor market in recent years has highlighted the challenges of assessing the proximity of the labor market to … full employment” https://www.federalreserve.gov/newsevents/speech/clarida20190409a.htm

17. Outline • Don’t @ Us with Your MV=PY • Don’t @ Us with Your Phillips Curves • Don’t @ Us with Your Low Unemployment Rate • You Like Price Controls and You Cannot Lie • Who Blinks First? • Conclusion

23. 2.50 2 1 2 1 0.82

24. For-profit businesses, • Non-profit businesses & organizations, • and • State & local governments • Non-loss organizations with a financial survival constraint. Job Creation vs. Survival Constraint

26. These two policies contain the sum-total of all possible choices when there aren’t enough jobs for everyone that wants one (i.e., ALWAYS) Involuntary Unemployment Job Guarantee

27. “[T]he pool of available workers willing to take jobs has been drawn down further in recent months, a trend that must eventually be contained if inflationary imbalances are to remain in check & economic expansion continue.”

28. Outline • Don’t @ Us with Your MV=PY • Don’t @ Us with Your Phillips Curves • Don’t @ Us with Your Low Unemployment Rate • You Like Price Controls and You Cannot Lie • Who Blinks First? • Conclusion

29. The ‘Price Level’ of Economic Theory Cannot Exist. In the Real World It is Necessarily a Social Construction

30. The ‘Price Level’ of Economic Theory Cannot Exist. In the Real World It is Necessarily a Social Construction Price setting Price Data Collection & Imputation Price Weighting Price Index

31. 42% of Core PCE is PROCYCLICAL Includes housing, recreational, food services, some non-durable goods 58% of Core PCE is ACYCLICAL Includes health care, financial services, clothing, transportation

33. The Nature of Prices Is Inherently Legal/Regulatory/Administered/Budgetary • Utilities • Interest rates • Taxes (sales/property) • Education subsidies/student debt • Intellectual property • Antitrust treatment of corporate power • Antitrust treatment of labor 'power' • Fossil fuels, agriculture • Medicare/Medicaid • Housing, rent • Government procurement • Involuntary unemployment

34. The GND will HELP keep inflation low ... • Medicare for All will decreasegrowth in spending/costs of healthcare • Tuition-free public universities will reducegrowth in education costs • A de-carbonized economy will reducespikes/variability in price indexes caused by fossil fuel prices

35. Outline • Don’t @ Us with Your MV=PY • Don’t @ Us with Your Phillips Curves • Don’t @ Us with Your Low Unemployment Rate • You Like Price Controls and You Cannot Lie • Who Blinks First? • Conclusion

36. Neoclassical Moves In MMT’s Direction • Eurozone design flaws • Unemployment isn’t the right measure of slack • Need for financial regulation in macro policy • Low interest rates may be the sustainable norm • QE isn’t inflationary • Need for active fiscal policy • NIRP isn’t the answer • Japan’s deficits & Trump tax cuts didn’t raise rates • Interest rates are about monetary regimes • ‘Printing’ or ‘dropping’ money isn’t a thing

37. “Draghi said the ECB's Governing Council … was at least unanimous about one thing: 'Fiscal Policy should become the main instrument.'"

38. MMT Moves In Neoclassical’s Direction

39. MMT Moves In Neoclassical’s Direction

40. Where Will the Next 'Blinks' Come From? • 'More(!) liquidity & capital' is wrong focus • Deficits/trade/financial fragility connection • Inflation constraint and non-fiscal payfors • Multiple categories of automatic stabilizers • RIGHT to a job works with ALL macro policies • Prices=govt/legal/administrative choices • Don't target inflation on backs of working people • Is central bank independence ever really a thing? • More monetary sovereignty as an explicit policy goal • Transdisciplinarity—there are no 'economic' problems

41. We’ll Do ANYTHING to Create More Jobs and Income . . . EXCEPT Directly Create More Jobs and Income!

43. Ultimately, MMT Isn't About Money

44. MMT Is About Putting What's Important FIRST and Putting Money LAST

45. Outline • Don’t @ Us with Your MV=PY • Don’t @ Us with Your Phillips Curves • Don’t @ Us with Your Low Unemployment Rate • You Like Price Controls and You Cannot Lie • Who Blinks First? • Conclusion

46. Some key takeaways ... • Don’t @ us with MV=PY, Phillips Curves, & ‘unemployment is low already’ as if these are settled, uncontroversial • Rethinking inflation/unemployment/deficits isn’t crazy, especially if you didn't get everything about them wrong •  Asking for a friend—if neoclassicals keep moving in MMT’s direction, is it MMT that has the ‘wrong model’? • We CAN and we MUST evaluate socioeconomic, technological & ecological outcomes without putting them in $ terms