![]() ![]() We can now circle back to automatic stabilisers. Alternatively, they need to use taxes to create a demand for the currency they issue so that it is valued by the private sector (and hence, the government can buy real goods and services for its fiat currency). The reason why governments need to impose taxes is that they need to reduce demand in the private sector to make goods and services available to the government. In some countries, an external currency is used, but this generally only makes sense for small countries, or badly-managed ones. In most developed economies, governments issue their own money, and they use this same money to pay for goods and services. Direct requisition was essentially used during the World War II command economy (in many combatant nations), but we prefer to avoid its use during "peacetime." The alternative to using money is to directly requisition goods and services - such as press-ganging unfortunate bystanders into the Royal Navy. The answer is straightforward: to provision itself. We need to drop our mystical debates about the origins of money (which appears to occur before the advent of writing as we know it) or semantic arguments about the definition of "money," and just ask ourselves: why do "modern" states use money? Also, many people do not understand what I mean by abolishing money from economic theory, to which I respond: my book is available at all major internet booksellers.) However, MMT is not greatly harmed by its abolition, which is why I am in the MMT camp. (To be clear, abolishing money from economic theory is my personal crusade, and is not a feature of MMT. This is yet another example of why money needs to be abolished from economic theory. As I would expect, these discussions had little value-added. They just work - instantly, spatially, automatically.Īs one might expect, some of the internet discussion veered off into discussions of money. ![]() What is interesting about Wren-Lewis, as well as your comment, is this seeming inability to see the automatic stabilisers (particularly the spend side auto-stabilisers) - which require *no* human beings involved at all. This article was triggered by the following comment by Neil Wilson on a previous article on my site: The conventional view is to acknowledge the existence of automatic stabilisers, but otherwise pretend that they have no effect on the economy. In my view (which may not reflect the official "MMT Party Line"), one of the keys strengths of MMT is that it is largely built around the importance of automatic stabilisers, and institutional details. The recent internet debates about Modern Monetary Theory (MMT) have been interesting, but the various critics of MMT have largely missed the elephant in the room: automatic fiscal stabilisers. ![]()
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