Once again, MMT is only a description of how money works, in the same way that hydrodynamics is a description of how water works. Hydrodynamics can tell you how to build a pump for a well, but not whether you would be violating someone’s water rights. MMT can tell you how to utilize money to organize social activity, including the most relevant thing to us, building industrial capital, but it doesn’t tell you whether bond markets or anyone else would allow you to.

In fact, half of Hudson’s Killing the Host is about exactly how US institutions are completely beholden to finance capital, and would never allow the use of monetary policy to increase industrial production! Hudson uses the MMT framework to explain how the Federal Reserve prints staggering amounts of money to inflate the price of financial instruments (including stocks and bonds) for the benefit of financial capitalists, instead of printing money to inflate the prices of goods and labor which would lead to the formation of a productive economy.

The whole point of MMT is that money is just an organizational tool, like writing or calendars - as a technology it was invented (in the ‘western’ world at least) in ancient Mesopotamia and has persisted through multiple system of political economy. But in every case, its basic features are the same: it exists only as an IOU issued by a government, which can later be used to pay taxes, and a government with currency sovereignty can issue money at will to order people subject to its taxation (or who, for whatever other reason, need to obtain money denominated in that currency, such as, for instance, repaying IMF loans or making international trades) to hand over goods or perform services for the government.

Whereas this person is saying that the behavior of money depends on “the consensus of the monetary system’s stakeholders”, and the fact that the federal reserve didn’t take action to slow rising treasury yields (i.e. falling global demand for dollar holdings) is proof that you “can’t consolidate the central bank and treasury”. They seem to go on a lot about “constitutional consensus” as a reason MMT doesn’t work, as if the behavior of money in general through all of history is dependent on the specific provisions of a specific state’s constitution. They say “it is a constant theme of their literature that the foreign sector can be treated as a non entity that does impose constraints on policy space” when that is literally the opposite of true, and Super Imperialism is primarily about how US interference in other countries’ monetary policy prevents them from being able to use their currency sovereignty to develop their own economies.

It’s true that by the logic of MMT, a country with all of the resources it needs within its own borders (== within the boundaries of its monopoly on violence == within the region it can enact taxes on) can print however much money it needs to mobilize fallow resources (or until 100% employment is reached) while ignoring the effects on its currency’s exchange rate, precisely because it doesn’t need to obtain resources through trade - exactly as was seen in the USSR under Stalin and, as a shadow of that, Russia after 2022. The sanctions applied to Russia “should” have collapsed it, because most other countries in the world would have collapsed under this sanctions regime, but unlike those countries Russia is capable of producing all its own food, fuel and raw materials. Indeed, freezing a bunch of the oligarch’s money and preventing capital flight from Russia meant rubles had to be invested in productive industries, on top of the state increasing spending on war production, which combined to give a massive boost to Russia’s productive economy! However, the Russian central bank did everything in its power to prevent and undo this, because it’s controlled by neoliberals, so printing money to develop the economy “doesn’t work” because at every turn, neoliberals will sabotage it!

They say “sure would be cool if we had an agency in the government in charge of investigating insider trading”, but using their logic the fact that insider trading wasn’t investigated proves that it can’t be - and in our currently existing political economy, they would be right! Investigating insider trading is specifically against the financial interests of the groups that hold political power over this economy, so it is impossible to investigate insider trading in the same way it’s impossible to implement the recommendations of MMT for building a productive economy. But that doesn’t mean that ‘investigating insider trading’ as an activity can never occur, the same way it doesn’t mean that MMT is incorrect.

…rather than understanding that “green dollars” - the kind of money you keep in your pocket in real life - and “yellow dollars” - US treasury bills - are called that because of the color of the paper they’re printed on?? That seems like a pretty important feature of the dollar economy to be completely unaware of!

Interesting post, thank you for tagging me. I appreciate the link to the book as well.

I do think there is some truth to this theory. I personally believe that the instability in the bond market could easily be a response to the instability seen in the stock market this past week. My feeling is that nobody except a few insiders within the Trump admin knew Trump’s play here.

I’m still of the opinion that not even Trump knows what his next play will be. China owns 9% of the bond market and has made it clear that they’re not going to be pushed around so if the trade war escalates further, there is a possibility like I mentioned in my last post that China will start selling off more of these bonds. It’s one of the easiest ways for China to retaliate if the tariff war continues to progress.

China has already made it quite clear that they will not falter in this war as they have added their own reciprocal tariffs on the US, which is already causing panic as we can see in the case of Amazon cancelling orders from China. I can see more companies making harsher unpredictable plays like this now and into the future.

Trump didn’t try to do what MMTers advocate for, DOGE is the exact opposite of MMTers would advocate. Him saying tariffs will bring revenue which makes America rich is also against MMT.

Not even Japan ‘does MMT’, Japan’s atypical monetary policy is not because it’s leaders understand functional finance but because they think large debt=money printing=inflation, they wanted inflation because their economy was struggling with deflation. However, their YCC policy shows that yields can be suppressed and pegged if the central banks want it to.

You can also contrast this with third world countries which raise interest rates as U.S. Fed does, not necessarily because they want to ‘maintain low inflation’ (though I’m sure some think like that) but because they want to reduce pressure on the exchange rate. These countries are dependent on essential imports like food and crude oil and other countries don’t want to accept their local currencies, so, exchange rate matters especially in a low-no subsidy austere fiscal policy environment promoted by the IMF. But the issue isn’t interest rate but exchange rate.

Edit: which is why I thought yesterday that Dollar will depreciate instead of treasury yields rising. Foreign countries will always have that lever to pull, and depreciation is the natural ‘automatic’ result when capital/financial account surplus shrinks. But instead, the Fed didn’t suppress yields and that was enough for Trump to yield.

‘Forced savings’ which modern Governments aren’t doing (US treasuries are treated in many similar to cash) are a legitimate way to reduce inflation during high aggregate demand times, that’s what Keynes advocated for in ‘How to pay for the war’. This is where Governments take your money away (voluntarily or involuntarily) so you have less purchasing power and reduces aggregate demand, once the bond matures you are given back the principal + interest (when the war is over). This isn’t borrowing to pay for Government spending but to manage aggregate demand.

putting this in my 2nd comment since i’m not educated enough on the subject (i.e. havent actually read the MMT texts myself) but also since it’s just hexbear and we say stuff based on vibes like 80+% of the time bare minimum anyways: i think this would explain so much of the more “orthodox” marxists’¹ misgivings about mmt (eg. michael roberts)

¹ just meaning “doesn’t agree with MMT’s analysis” here