Posts Tagged ‘deficit’

Krugman attacks MMT – a good or a bad sign?

another old post – getting closer

30 Mar 2011 19:03

In two entries on this NYT blog, Paul Krugman has recently claimed that MMT (Modern Monetary Theorie) states that „deficits never matter“.
This was not only a gross misrepresentation of MMT, it has also been clearly refuted by many supporters that understand monetary operations.

There has been some debate about the question why Krugman choose to take this topic, and why he seems so clueless. [He repeatedly stated that their is indeed a „solvency risk“ for the United States – just not right now…]
But he completely fails to explain how a sovereign nation that is indebted only in its own currency, which is issued by it’s own central bank on behalf of that nation, can ever run out of it’s own currency. [The central bank can always „print“ as much of it’s own currency as it deems necessary – although, mostly it doesn’t print them, but creates it by just crediting bank accounts..]
That Krugman shouldn’t be aware about this basic fact in a modern (not commodity or fixed exchange rate based) currency system seems rather unbelieveable. So why does he claim that there „might“ be a solvency risk (beside the criminal intent of some politicans to destroy the middle class and the social safety net, which might lead them to engineer a solvency crisis – by voluntary default..)

There are, IMHO, just two possible explanations:

1) Krugman tries to look „serious“. Despite his frequent attacks on so called „Very serious people“, he is afraid to fall from grace entirely,so that even the New York Times wont take him serious anymore.. Therefore, he deliberately states bullshit, but tries in fact to place himself in the „center“ of a debate (as a centrist, and not a radical) and therefore open the spectrum of the debate (there are not only people to the right of Krugman, but also an entire school of thought to his left…). In that way, he might actually give MMT an opening – and if the position of the austerity freaks has caused sufficient dammage, he will be able to tell „I told you so“ – and claim that he agreed (mostly) with MMT on most issues all the time….

2) Krugman is a neo-liberal and reactionary at heart. He acts as the left wing horse of a „Progressive“ chariot, but it’s a TROYAN HORSE WAGON. The centre stage is taken by President Obama, who was elected on the promise of „Hope“, and was seen as a bringer of hope by many progressives, but turned out as a big disappointment. [A disappointment that Krugman displays himself..] But, as we can easily see by now, Obama is no progressive at all, he could easily be a member of the GOP (he is probably far to the right of Nixon). But instead of a clear break, an attempt to build a progressive alternative, Krugman still gives the impression that Obama is „a hopeless case, but our only hope“. So he is disarming real progressives. And in that line we might as well see his attack on MMT – look progressive, but validate the basic nonsense of the neo-liberal deficit hawks. As a good Troyan horse, cause confusion, disarm your „friends“, so that they might get slaugthered..

There might be hope that it’s more case 1) – but I’m afraid case 2) might be closer to the truth.. – what are you thinking?