[TEASER] The Problem with Modern Monetary Theory w/ Doug Henwood

Feb 8, 2024

Doug Henwood, an expert in modern monetary theory, explores the central idea of MMT which argues that governments can create money without consequences. The hosts critique this theory and discuss its validity, questioning whether it is sound or just snake oil. They also delve into the role of central banks in money creation and the potential consequences of reversing money printing.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

INSIGHT

MMT Core Idea

The central idea of Modern Monetary Theory (MMT) is that governments can create money without taxing or borrowing.
This challenges conventional economic thinking about government spending.

INSIGHT

MMT Critique

Doug Henwood finds MMT seductive yet nonsensical, misunderstanding capitalism and the human condition.
He believes it overlooks fundamental principles like "nothing is got for nothing."

ANECDOTE

Federal Reserve Actions and Inflation

The Federal Reserve's actions, like buying Treasury bonds during COVID, influenced inflation.
Now, reversing this process by letting bonds mature aims to tighten credit conditions.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

You can listen to the full episode with Doug Henwood by subscribing to our Patreon here: https://www.patreon.com/upstreampodcast

As a Patreon subscriber, not only will you get access to at least one bonus episode a month, usually two or three, as well as early access to certain episodes and other benefits like stickers and bumper stickers, depending on which tier you subscribe to, but you’ll also be helping to keep Upstream sustainable and allowing us to keep this project going. Find out more at Patreon.com/upstreampodcast or at upstreampodcast.org/support. Thank you.

Modern Monetary Theory, or MMT for short — if you haven’t heard of it explicitly or read about it in an economics textbook, you’ve certainly come across some of its theories and ideas out in the wild. Essentially, its proponents argue that, when it comes to the way that money and taxes work, most of us have it all wrong.

MMT is billed by its advocates as a radical new way to understand money and debt. The central idea of modern monetary theory is that governments can and should print—or in today’s world, create with a few keystrokes—as much money as they need to spend. It’s a bit more complicated than that, but that’s essentially it—that the government doesn’t actually have to worry about taxing the rich or borrowing money because it can just create money out of thin air. And this sounds nice, right? We get to bypass that annoying question that we’re often asked on the left, “...but, how will you pay for it?”

But, maybe it’s not quite that easy to bypass that question. Maybe there’s a lot more to the equation that MMT leaves out. And maybe this theory is just a mirage—or, as our guest in today’s episode has written, “a phantasm, a late-imperial fever dream, [and] not a serious economic policy.

So, is MMT a sound theory? Or is it snake oil? That’s the question that we’re going to be exploring in today’s Patreon episode with Doug Henwood, a journalist, author, economic analyst, host of the radio show and podcast Behind the News, and author of the article Modern Monetary Theory Isn’t Helping published in Jacobin.

What does MMT miss? What does it get wrong in its explanations for how taxes, inflation and debt work? And why is it important for Marxists to scrutinize and criticize any monetary theories that say so little about labor, production, exchange, class conflict, and the function of the state? These are just some of the questions we’ll explore in today’s episode.

Further Resources: