Modern Monetary Theory, MMT, is still considered a heterodox theory and a bit outside the mainstream. That’s largely because of two factors. First, graduate economics education in money is largely stuck in quasi-gold standard era stuff from pre-1971. Milton Friedman and his disciples still dominate, despite the facts. Empirical evidence and knowledge of how banks & central banks actually work doesn’t support the theories, but we publish the stuff anyway. Second, central banks actually dominate the research agenda and funding of monetary economics research. Getting central banks to research and publish MMT stuff is a little like getting big Pharma to publish research on nutrients being superior to drugs.
Anyway, I came across this quote from Thomas Edison from 1928. He and his good friend Henry Ford knew quite a bit about how to generate real economic wealth and well-being, and, it seems, they understood some basics of MMT, too. (from http://www.michaeljournal.org/appenD.htm)
“That is to say, under the old way, any time we wish to add to the national wealth, we are compelled to add to the national debt.
“Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30 million of their own money, the people of the United States should be compelled to pay $66 million — that is what it amounts to with interest. People who will not turn a shovel full of dirt nor contribute to a pound of material, will collect more money from the United States than will the people who supply the material and do the work.
“That is the terrible thing about interest. In all our great bond issues, the interest is always greater than the principal. All of our great public works cost more than twice the actual cost on that account. But here is the point.
“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good also. The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 percent, whereas the currency pays nobody but those who contribute directly to Muscle Shoals in some useful way…
“It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one fattens the usurers and the other helps the people. If the currency issued by the Government was no good, then the bonds would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold.”
By the way, if you really want to dig in and begin to understand MMT and it’s implications, read Bill Mitchell’s blog at http://bilbo.economicoutlook.net/blog/
One thought on “MMT Isn’t All That New”
This is a great quote. If I may make a shameless plug, readers interested in MMT might also enjoy http://neweconomicperspectives.blogspot.com a blog from a group of economists at the University of Missouri – Kansas City.
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