Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Much of the criticism is from 'post-Keynesian' economists and reflects arguments within the post-Keynesian community where some see MMT as an appropriate whipping boy to disguise their own disarray. MMT is NOT a complete theory of Economics. It is simply an explanation of how fiat money works when it is freely traded internationally.

Ranall Wray is one of the seminal figures in MMT and one of his efforts has been to solve the unemployment problem with his Job Guarantee. Palley is simply wrong on that point. Post Keynesian Economics is a broad field. Parts of that field are needed to compliment MMT, which supplies the theory of money. Not all traditions in economics have complete theories of economics, Georgism, for instance. Yet the Georgist tradition provides valuable insights and offers effective solutions. Gödel's incompleteness theorems come to mind in this respect.

Of course the Cato Institute will oppose MMT. Half of them are closet gold bugs. But, while that world is gone, the nostalgia for it remains. It is true that infaltion took off after the USA abandoned the last link to the gold standard in 1971. That does not imply that the resulting inflation was CAUSED by abandoning the gold standard. Allowed? Certainly.

The response to leaving the gold standard was certainly  far less than optimal. Larry Summers long ago quipped that 'we probably ought to have done something about the price of gold.' What could that have been? Buying and continually rolling over a large out of the money Long Term Equity Put on gold would likely have kept it below $60 for a good while. And the NY Fed could have done that off book and at almost zero cost. Keystrokes are cheap.

To Milton Friedman the abandonment of the gold standard in conjunction with the oil shocks and the resulting stagnation was an opportunity to bash Keynes. Keynes was not around to defend himself and the media bullhorn had been given to Freidman by the same people who gave him his direction. Friedman knew on which side his bread was buttered.

The most sensible response to the oil supply shocks was import substitution, which Carter tried, but which the clout of the Oil lobby derailed. The other available response was to allow wages to rise so as to make the shortage price more affordable. Instead we got Volker. Friedman's theories about controlling the money supply were virtually forced upon the Fed, but quickly proved unworkable. 'Supply Side' 'economics' scarcely deserves discussion.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Apr 29th, 2021 at 03:48:29 PM EST
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