Bill Mitchell and Chris Williamson Podcast

The GIMMS organised Labour Fringe Meeting with Bill Mitchell on the Green New Deal successfully happened and there will be a forthcoming video on this from GIMMS shortly.

A second meeting, organised by Greg Hadfield at the Rialto Brighton (no surprises there on either count with respect to Chris Williamson alone), involved both Chris Williamson and Bill Mitchell. I was not able to attend either meeting but, thanks to the MMT Podcast team,  there is an audio podcast of the latter.

This is primarily Williamson introducing and mc’ing a talk by Bill on MMT and Labour and. also, MMT in general. It is a good talk with some decent and serious questions with interesting answers in the Q&A. I do recommend it, whether you are a Labour supporter or not. There is much to gain there, especially if you are not familiar with MMT.

Still I think a major opportunity was missed by GIMMS and Bill, on both the topic and fellow participants. Given Bill”s last two books (not the text book) and the situation in the Uk over Brexit I thought a three way talk/debate between a hard Lexiter such as Bill, a soft Lexiter such as Stephen Kinnock and a Remainer such as Kier Starmer could have drawn much interest from across Labour and possibly achieved national media coverage.

Once I had heard there was going to be a GIMMS Labour Fringe meeting, I thought of then suggested this to a couple of Labour activist friends who are well connected in Labour and with whom I have discussed MMT before and had recommended they read Bill’s blog. They thought this was an excellent idea and very doable but there were a number of caveats.

Whether we could have got the MPs I suggested, still possible they said but given the official evolving stance of the Labour Party was moot but, certainly, we could have got speakers significant to Labour, MPs or not, to represent those other positions.

Yes, this would have been more than just an MMT meeting but Bill (or someone else) could have started with an introduction to MMT, noting that, even within the MMT lens, one could be for any of those three positions (as is the case across the different members of GIMMS and the advisory board).

When GIMMS was  planning this meeting, surely something like this was thought of as a possibility? Maybe this was preferred but not feasible in the end – unlikely given the feedback I received? Surely someone in the advisory board would have suggested something like this, if not by GIMMS executives? Were the board consulted? I suspect that nothing like this were ever considered and the board were not consulted.  which would be a failing of the GIMMS team.

From my chats with these activists we all thought this could have far more potential than just a GND/MMT meeting with one MP. Which brings us to the other caveats.

Of course they said : “it’s a bit late to suggest this now”,  “you need a venue”, “who is going to organise/promote/fund it” , “too late to get on the official fringe program”. When they found out that there was a venue, organiser, topic and speakers already, we still all thought my suggestion was better. The killer, go on guess,  was when I said it was currently with Chris Williamson. They both said this might make it harder for GIMMS, and  Bill, for any future such meetings especially with other MPs such as I suggested. Neither I nor they knew the personal stance of these specific MPs on each other (one signed the letter to re-suspend him, one did not) but they noted it as a general concern.

Now I am sure that GIMMS executives are far better connected with Labour than I am and they will disagree with this, but this is what two people I know, both very long time Labour activists, that I happened come across recently said. In old internet parlance YYMV, your mileage might vary.

Following on this note, I have to add a few comments given the background of my issues over Chris Williamson  with regard to the promotion of MMT.

On the one hand, this talk alleviates 99% of my concerns in  my previous post. There was nothing contentious or controversial that would have caused me problems to have attended. I was going attend anyway and the training meeting the next day but was unable to attend either in the end. Certainly, even though, as should be clear, I dislike Chris Williamson, and continue to hold the position that our  only official MMT organisation should not be promoting him, should there any further such meetings, I would have no qualms about attending. I will continue to criticise GIMMS if it were them doing the promotion, in the future. In this case, and only through force majeur, the second meeting was not organised by GIMMS.

On the other hand, this podcast was weirdly edited. Williamson’s introduction to Bill sounds like it starts mid flow and that likely other prior statements had been omitted, or it could have just been an engineering/sound issue? At around 14 minutes, Bill comments on social media controversies over him talking with Williamson. Apart from me defending Bill against an insinuation of antisemitism by a well know UK economist, there was apparently much I missed out on. I could not find the particular phrase Bill stated was associated with him (or MMT?) “the dark side of fascism” in online searches.

On a side note, I did find something intriguing although not do with Bill directly, but I imagine it is of the same ilk – Statement Against Stephanie Kelton’s Meeting With the Far Right in Japan –  since I know Bill has met up with Japanese politicians too. This goes to the point that I have made  calling MMT a ‘framework’ and, what Bill calls a “lens”, it is independent  of ideology and values. Bill makes this clear in the talk and I fully agree and have stated the equivalent myself. We want all parties to use the MMT framework, this will manifest different policy implementations given differing value sets. For just illustration one could imagine both Labour and the Conservatives agreeing that the Job Guarantee is a better macroeconomic stabilization tool than the alternative of unemployment, but Labour might do this with a Basic Income too and the Tories without. (Bill uses another example).

Still Bill does make some unfortunate and ill judged comments, in the talk and online. He unnecessarily defends Williamson over his antisemitism issues in Labour in the talk. He does the same online and, it seems,  he continues to encourage a silly and non-existent division in the MMT community when he says, in conspiratorial tones:

As a result of Chris’s suspension from the Labour Party for spurious claims he made anti-Semitic comments, some characters (unknown – not enough courage to reveal themselves) threatened the venue where our event was to take place.     

Well every MMTer I have (UPDATE: I meant privately, most, cowardly in my view, go public on this)  corresponded to on Bill’s position with respect to Chris Williamson, given my previous posts and tweets, is of the view, explicitly or implicitly,  that Bill is simply blinded to the failings of Williamson, because Williamson is the only UK MP who promotes MMT, thats it.  Whilst I can’t speak for anyone else, from my correspondences, I doubt that any MMTer would have tried to sabotage that event.  Far more likely, in my view, it would have been either a campaigner against Labour Antisemitism or a local resident, as this was public knowledge given the Independent article: Labour facing fresh Chris Williamson row as suspended MP set to speak at ‘multiple’ events at party conference, 

Making such insinuations is pathetic and unbecoming of an economist of your stature  Bill. Grow up.

 

 

 

 

 

Quora answers on Quantitative Easing

A couple of Quora answers here.

How is QE different from MMT

My answer:

These are not comparable as they are entirely different – one is a policy evaluation framework and the other is a specific policy tool.

Modern Monetary Theory (MMT) is a macroeconomic paradigm that can be used as a policy science framework to evaluate the context specific economics of any policy.

Quantitative Easing (QE) is an “unconventional” monetary policy.

MMT can be used to evaluate the claimed benefits and deficits of a monetary policy such as QE.

So what is Quantitative Easing anyway? My answer   to the question Where can I find a theoretical framework for quantitative easing?:

The German Professor of Economics at the University of Southampton, UK, Richard Werner, invented the term, developed in advising the Japan government on fiscal and monetary policy in the 1990s. How QE is actually applied now is different but you should start with some of his arguments such as Quantitative Easing and the Quantity Theory of Credit. This starts:

“‘Quantitative easing’ (QE), has received much publicity in the past five years. However, its effectiveness remains disputed. Moreover, there are different views about what constitutes QE. It is the purpose of this contribution to review the origins and varying applications of QE, using and thereby explaining the macroeconomic model that gave rise to the concept. Called the ‘Quantity Theory of Credit’, this is arguably the simplest empirically-grounded model that incorporates the key macroeconomic role of the banking sector — a task belatedly recognised as crucial by researchers in the aftermath of the 2008 crisis.

The Quantity Theory of Credit after 20 years (QTC)
“The central argument is a dichotomous equation of exchange distinguishing between money used for GDP-transactions (determining nominal GDP) and money used for non-GDP transactions (determining the value of asset transactions). Money is not defined as bank deposits or other aggregates of private sector savings. Banks are recognised as not being financial intermediaries that lend existing money, but creators of new money through the process of lending. Growth requires increased transactions that are part of GDP, which in turn requires a larger amount of money to be used for such transactions. The amount of money used for transactions can only rise if banks create more credit. Banks newly invent the money that they lend by pretending that the borrowers have deposited it and thus crediting their accounts without transferring any money from elsewhere. This expands the money supply and it suggests that the accurate way to measure this money is by bank credit.It can be disaggregated into credit for GDP transactions (CR) and credit for non-GDP (i.e. asset) transactions (CF). ”

The Origins of Quantitative Easing

“The QTC suggests that neither interest rate reductions nor fiscal expansion, nor reserve expansion, nor structural reforms would be able to stimulate nominal GDP growth. Based on this model I proposed in 1994 and 1995 that a new type of monetary policy be implemented in Japan, which aimed not at lowering the price of money, or expanding monetary aggregates, but at the expansion of credit creation for GDP transactions. Since the expression ‘credit creation’ was considered difficult to understand in Japanese, I prefaced the standard Japanese expression for monetary stimulation (‘monetary easing’ or ‘easing’) with the word ‘quantitative’ to declare that ‘Quantitative Easing’, defined as credit creation for GDP transactions, would create a recovery”

“ I suggested in numerous publications that the central bank purchase non-performing assets from the banks to clean up their balance sheets, that the successful system of ‘guidance’ of bank credit should be re-introduced, that capital adequacy rules should be loosened not tightened, and that the government could kick-start bank credit creation and thus trigger a rapid recovery by stopping the issuance of bonds and instead entering into loan contracts with the commercial banks ”[My emphasis]

Abuse of the term Quantitative Easing

“While my recommendations were not heeded, the label I used caught on. Critics from both the Keynesian and monetarist camps began to redefine QE as an expansion in bank reserves — despite the fact that I had been arguing that such a policy would not work. A new name for an old policy was only likely to cause confusion.”

Leading MMT economist, Australian Bill Mitchell, Professor of Economics at the University of NewcastleNew South Wales, Australia analyses what is actually QE – an expansion in bank reserves – arguing a) that that is just an asset swap of primarily Treasury Securities for Central bank Reserves, neither adding nor subtracting to private sector assets, only changing their composition and the interest rate channel and b) that, since banks do not lend out deposits and that, instead, loans create deposits, therefore they are not reserve constrained and, therefore reserve expansion has no direct affect on banks willingness to create new bank credit “loans” – which was the purported goal of QE.

For more see Quantitative easing 101

Note that some QE, such as part of QE1 in the USA did buy “bad” loans from the banking sector, such as some Mortgage Backed Securities and this is closer to the original design of Werner’s QE but, on the whole, QE is reserve expansion.

It is important to note that Werner and Mitchell both disagree on the model of bank credit – particularly on the second emphasis point above in the Werner quote, that is, banks loans to the government – although they are more closely aligned than, by contrast, the Monetarists and “Keynesians” (actually New Keynesianism) that Werner discusses.

How does MMT avoid the results experienced in Weimar Germany?

Another quora answer. The question was “How does MMT avoid the results experienced in Weimar Germany?”

MMT (Modern Monetary Theory) is a description of economic reality, arguably better than alternatives such as New Classical and New Keynesian etc. approaches.

Hence it can be applied to any economy, including the Weimar Public and to identify whether policies were fit for purpose, that is to achieve what the policy makers claim.

A government can only buy available real resources including the unemployed. If its balance is more than available resources, inflation will result since there is too much money chasing too few resources. It also recommends not to have foreign currency denominated debt, as this diverts and prevents efforts to successfully manage the domestic economy

In the Wiemar’s case, due to the Treaty of Versailles, Germany both had unsustainable gold denominated debt (which is equivalent to foreign currency denominated debt) and there was a supply side resource crash, due to the actions of France over Rhine resources. In such a scenario MMT shows that inflation would result, and, with positive feedback due to these two process, likely to turn into hyperinflation.

If people had understood MMT (or the equivalent then), they would have argued against the terms and conditions of the Treaty of Versailles and predicted the result. This is pretty much what Keynes did in The Economic Consequences of the Peace – Wikipedia.

So if MMT had existed then, it would have evaluated and criticised the Treaty of Versailles economic policy proposals, warning of the consequences of those policies and it would have been shown to be correct for that scenario.

Is Modern Monetary Theory Legitimate

I am going through some old answers of mine to Quora questions. Here the question was “Is Modern Monetary Theory Legitimate“. The following is a copy of my answer:

It depends on what you mean by “legitimate”. I take it to mean as in an effective and successful explanation of a phenomena, better than alternatives. That is more sound, valid and likely than alternatives.

This would apply to, say, the standard model theory of matter, the theory of evolution through natural selection, the genetic theory of inheritance and so on. These are all legitimate, whereas,say, the Lamarckian theory of evolution is not. By contrast, Newton’s theory of gravitational attraction is still legitimate but not as a complete explanation but, rather, as a special instance of Einstein’s General Theory of Relativity.

Macroeconomics as a distinct field within economics was launched by Keynes’ General Theory arguing that classical, marginalist, market economics was only a special case – legitimate within its constraints. The main Post-Keynesian position is that that and it’s successors such as neo-classical, Real Business Cycles and New Keynesian theories and so on are not just special rather than general but also fail to apply in the real world.

Well Modern Monetary Theory is, by design, an internally coherent and externally consistent systematic formulation and enhancement of some of the best discoveries in Post-Keynesian macroeconomics. It more effectively explains many real world financial phenomena such as how government finance actually works and what tools the government has to manage unemployment, inflation/deflation, productivity, investment, consumption, trade and so on.

If you agree in this scientific sense rather than just due your subjective opinion, politics and preferences, it is legitimate and more legitimate than its aforementioned conventional/mainstream/ orthodox competitors as well as Austrian and Marxist alternatives.

Do not confuse this, as other answers do, with it being a critique of Neoliberalism and/or of left or right political values. MMT does indeed undermine Neoliberalism (but you do not need MMT to do that), showing not only what are the myths that neoliberalism requires as a political ideology but also why these are myths and what the implications are of freeing us from these myths. Neoliberalism has long infected not just right but also left political views.

So debunking Neoliberalism is not a specific attack on the right, just on an empirically unsound ideology that they more commonly employ. Too many on the left are opposed to austerity but still drink the Neoliberal Kool-Aid without realising it. Whilst, as a result, MMT appears to be more popular amongst some left thinkers, MMT itself, as a legitimate theory is not bound to any political value sets. Given whatever value sets one has, MMT can better and more legitimately show what the real likely outcomes of proposed policies than alternative and less legitimate theories.