by L. Randall Wray

Here’s the deal. For more than two decades a small group of scholars hashed out what became Modern Money Theory. We’ve written many books, a hundred chapters for edited volumes, hundreds of published articles, and thousands of blogs presenting the theory and defending it against critics.

Yet practically every day a Mole pops up to ask: “Why doesn’t MMT ever talk about XXX?” You’ve seen the claims:

Mole 1: MMT never deals with inflation.

Mole 2: MMT never talks about exchange rate effects.

Mole 3: MMT cannot relax the consolidation assumption.

Mole 4: MMT ignores the private banks.

Mole 5: MMT is just like slavery; it forces people to work for welfare.

Mole 6: MMT promotes unbridled growth, ignoring environmental sustainability.

We Bop one Mole and another jumps up. In fact, every possible critique of MMT has been addressed in at least a dozen different academic papers and probably a hundred blogs. The problem is that the Mole Bopping is sometimes buried deep in the paper, perhaps in an argument that is too academic. Or it is too hard to find the exact blogs where we’ve dealt with the issue. Heck, I cannot remember 95% of the stuff I’ve written, much less find it.

So I thought we’d play a game, Bopping Moles, and try to keep these Mole Boppings organized for future reference. When Mole 1 Pops up again, we can just pull out Mole Bopping #1. No reason to re-Bop if you’ve Bopped ‘em once.

We’ll Bop a Mole today. I’ll open up the comments section to your suggestions for the next Mole Bopping.

Remember, it is a game. No animals—whether two-legged or four–are really going to get Bopped. This is just a metaphor. No animals will be harmed in the making of this game. And don’t call any real humans Moles. Some people would take that as an insult, and I suppose most Moles would, too.

Any resemblance between any real person and today’s Mole is sheer coincidence.

Mole #1: Does MMT really require a Job Guarantee program?

Before we dig into this, we need to set the rules of the game. We can only Bop one Mole per game. There could be a number of related Moles, but we can only do this one today.

To make things a bit more difficult, the Moles Pop Up randomly. If you think about it that has to be true: if they Popped up in sequence they’d be easy to Bop. No sport there. But what that means is that you have to take for granted a lot of the other elements of MMT.

For example, the “why would anyone accept a fiat currency” Mole cannot be Bopped today. Nor can we Bop the “government cannot possibly afford to hire everybody” Mole today. You will see that these Moles are related to today’s Mole. We will take it for granted that “taxes drive money”, as MMT says in short-hand. You accept fiat currency because you need it to pay taxes and other obligations to the state. Obviously there is a Mole who claims that currency is accepted because there is a belief that others will accept it. I call that the BillyBob and BuffySue infinite regress theory of currency. We won’t play that game today. And we will take it for granted that sovereign government that issues its own currency can always afford to “keystroke” its spending. We won’t Bop the Moles who claim that “given institutional constraints, the US government needs to get money from taxpayers and bond buyers” today, either. We’ll have fun with them later.

So, given that we accept that taxes drive currency, and that sovereign government can “afford” to spend on labor, we want to discuss what “anchors” the value of the currency. It is not enough to say that you want currency to pay taxes—that is, that existence of taxes ensures a demand for currency. But we want to know why currency retains value in exchange.

Now, orthodox economists just love the “scissors” of demand and supply. They always have it ready-at-hand to explain the price of everything. Given essentially unlimited wants facing scarce supplies, the equilibrium price does the business of efficiently allocating to highest bidder.

In my view, “demand and supply” do not explain prices or anything else of interest in the economic sphere. But leaving aside my skepticism, those “scissors” cannot work when we are talking about sovereign currency—or “finance” more generally. Neither currency nor finance is a naturally scarce resource. We can have as much of them as we want, by keystroking them into existence. So what we actually have is a practically infinite supply of finance facing what in many circumstances is a limited supply of stuff to buy.

The old neoclassical approach used to try to finesse this by proclaiming that the supply of finance is limited by available savings—the loanable funds approach. There are still some orthodox economists and virtually all Austrian economists who remain confused about this. But anyone who understands banking and government finance knows that finance is not in any way constrained by saving.

Indeed, it is nearer the truth to reverse that and say that supply of finance might on some conditions constrain saving. Keynesians, of course, know that investment (plus the budget deficit and net exports) creates saving. Saving is the “pecuniary accountancy” of investment (plus the budget deficit and net exports); that is, saving is just the accounting record of autonomous spending. But you don’t need to understand that to follow the argument here.

Indeed, almost everyone understands that we need to constrain private financial institutions in their credit creation—because they might create too much finance that bubbles up prices of goods, services, and assets. That’s the idea behind my claim that finance is essentially unlimited, but the supply of stuff to buy is normally finite. (I’m going to skip over caveats that are not essential to understanding the argument.)

And this goes doubly for the constraints most want to put on government’s spending. This is precisely why orthodoxy reacts in horror at the implications of MMT: if government can “print money”, it will spend until it drives the nation to Weimar hyperinflation. Government’s fiat money is essentially unlimited and it will bid up prices of everything it buys until the currency becomes worthless.

While MMT doubts the political economy of this argument, we certainly do agree that government can “spend too much”, causing inflation. Since government cannot “run out of money” we do need to constrain its spending. The budgeting process in a democratic nation seems to us to be sufficient to prevent hyperinflation.

But it is not always enough to prevent inflation. MMT from the very beginning has always wanted to make our economy less inflation-prone. Indeed, the two research groups that contributed the most to developing MMT included price stability in their mission statements: at UMKC it is the Center for Full Employment and Price Stability; at the University of Newcastle it is the Centre of Full Employment and Equity. Both centers have pushed for full employment but with price stability, and both reached the conclusion that we need a better “price anchor”. This concern follows directly from the recognition that we cannot rely on natural quantity constraints on government finance to keep its spending low enough to prevent pressure on prices. And we recognize that inflation pressures normally arise before full employment is reached. So if we are going to pursue full employment, we need a better price anchor.

The mainstream view has long been that “full employment” and “price stability” are incompatible goals. They claim that you must have substantial unemployment to keep prices in check. You can call it NAIRU, you can call it the “natural rate” or you can call it the “reserve army of the unemployed”. It is a view shared by virtually all economists outside the MMT camp. According to all of them, the unemployed serve as a price anchor; the suffering of the unemployed does the duty of keeping the currency scarce and valuable. Unemployment is the “cost” to achieve the “benefit” of low inflation.

We reject that view as unnecessarily defeatist.

However. And here’s the Big However. We do agree with the mainstream that you need a price anchor, or otherwise pursuit of true, full employment probably would, at least much of the time, cause inflation. So, we, too, want a price anchor. We object to the (usually implicit) claim of just about everyone outside the MMT camp that unemployment is the only possible price anchor. Other economists do not have the imagination to come up with any alternative price anchor for a fiat currency.

In our view, that is wrong.

Here is Warren Mosler’s response, in what is almost a Haiku in its simplicity:

It comes down to this:

With ‘state currency’

There necessarily is,

Always has been,

Always will be,

A buffer stock policy.

Call that the MMT insight if you wish.

So it comes down to ‘pick one’-


2.Foreign Exchange





I pick employed/JG/ELR

As it works best as a buffer stock based on any/all criteria for a buffer stock.

So yes, it’s an option.

You are free to pick one of the others.

So…. You can have MMT but you’ve got to choose a price anchor. Some want a commodity buffer stock (usually gold). Others want to tie the domestic currency to a foreign currency. Most want unemployment. By contrast, MMTers follow Warren Mosler in choosing an employed bufferstock—the Job Guarantee or Employer of Last Resort program.

Let us look at these alternative buffer stocks in turn

1.Gold (and other commodities)

I won’t go into the history of the “gold standard”—most people misunderstand how it actually worked, and you can read more in my 2012 primer, Modern Money Theory, published by Palgrave. Let’s just use the imaginary version in which government agrees to back its currency against gold at a permanently fixed exchange rate (say 1 ounce equals $1). You can bring your gold to the government and it will give you currency at that exchange rate (less a fee); if you get tired of holding currency you can take it to the government and get gold (less a fee). Government gets some seigniorage based on the fees. In order to spend more than its seigniorage fees, government has to tax or borrow its currency.

Gold supplies are increased through mining, by melting down the family jewels, or through gold inflows (current account surpluses or international borrowing). Private banks could issue IOUs (notes or deposits) converted on demand to government currency. To ensure they could make those conversions, they’d need some currency reserves—less than 100%, leading to the notion of a deposit multiplier. Normally, augmentation of the gold supply would be slow (except for a new discovery), hence, expansion of the “money supply” (currency, notes and deposits) would also be slow. Government spending would be constrained since seigniorage fees, taxes, and ability to borrow its own currency would all be limited by the slow growth of currency.

Hence, the belief is that the value of the currency would be well-anchored by the gold stock. Barring new, large, gold discoveries or (amounting to the same thing) technological advance in gold mining techniques that greatly reduces costs, prices would be anchored. For evidence, goldbugs often point to the long-term trend of prices in the US in the 19th century—which began and ended with approximately the same price level. The US national government was small and frugal outside major wars. And since gold acted as the international reserve, the so-called specie-flow mechanism operated to keep trade reasonably balanced (net importers lost gold, deflating their economies until trade balance was restored).

At least, that is the way it works in the popular imagination. (That it never actually worked that way is not too important for this discussion.)

Gold is a finite resource with enough demand for non-money use to keep it reasonably valuable in monetary use. If it were rather equally distributed around the globe such that unemployed resources could always be devoted to mining gold, it could serve as a reasonably good anchor. When the demand for currency rises, you mine more gold; when the demand for currency falls, you stop mining. The price of gold relative to the price of everything else sends signals to the miners, and the government can tweak its buy price and sell price to increase or reduce the rate of accumulation of gold reserves and currency emission.

Recall Keynes’s famous argument that if you cannot find anything better to do with the unemployed, then you could hire them to dig holes—think, mine gold. After mining the gold, they could dig holes for a safe basement under the Federal Reserve to rebury the gold. We could tie the currency to the reburied gold, and promise to issue no more currency unless we put labor to work again to unbury new gold supplies and then rebury the mined gold under the Fed. We’d pay these workers in paper receipts for the gold they unburied and reburied. Those paper receipts would be our currency, kept strong by our bufferstock of gold unburied and reburied by hardworking gold miners.

Government could also allow private enterprise to mine the gold, which would be brought to the Fed’s basement for reburying in exchange for the warehouse receipts. In mean times, when private enterprise in other endeavors found it hard to sell anything else, it would devote its efforts to mining more gold; in good times, productive resources would flow out of gold mining toward other prospects.

There are several disadvantages of using gold as a buffer stock in this manner. First, the resources devoted to mining gold to be reburied at the Fed are essentially wasted—which was Keynes’s point about hiring the unemployed to dig holes. We could just as well simply conduct a geological survey to estimate the nation’s buried gold reserves then issue currency against the unmined gold. After all, whether it is buried all over the nation, or buried in the Fed’s basement vaults doesn’t really matter.

The government could issue currency against the unmined gold reserves to hire workers–who would have devoted all their efforts to digging holes to find the gold, and then digging more holes to rebury it—to do something more useful than hole digging. They instead could build the nation’s infrastructure, clean-up the environmental messes created by our capitalistic undertakers, provide elder and child care, and so on. In this way, we could pretend the unmined gold would back the currency and we’d waste no resources in the unnecessary task of digging holes. Labor would be unleashed to serve a public purpose.

Some of you might recognize that this is remarkably similar to another buffer stock proposal that we’ll turn to below.

(Note that if the unmined earthly gold supply can serve as backing to the currency, it is no intellectual leap to include the yet-to-be-discovered gold supply on Uranus as backing to global currencies. So long as the gold-backed-currency is issued to employ labor to do useful things, it can serve as an effective price anchor. Keep that in mind when we explore MMT’s preferred buffer stock below.)

Another problem is that given the resource constraints on gold mining, there’s no guarantee that the gold stock will grow at a pace that is close to economic growth. If economic growth does outpace growth of gold reserves, this can take place only by “leveraging” the gold supply. We won’t go into all the dynamic effects—the three balances and so on—but the increased leverage makes the economy more susceptible to the dangers of a “run” to gold, as everyone tries to convert claims on claims on gold to the real thing. Indeed, this is what the historical record shows. Typically, in a financial crisis the government goes off gold as it tries to quell the crisis through lender of last resort activity. A more-or-less fixed gold supply conflicts with the necessity to “lend without limit” in a run to liquidity.

And there’s the problem with the specie-flow mechanism, which never worked as smoothly as imagined. In practice, a dominant currency would be used as the international reserve so that the gold really did not flow. A center like London would lend pounds to importers, accumulating claims on them. Beggar-thy-neighbor Mercantilism depressed economic activity as creditors tried to maintain their dominant status and as debtors tried to avoid digging themselves into deeper debtor holes.

The gold standard was not dropped capriciously. Indeed, rather than arguing that nations abandoned the gold standard in the Great Depression it is probably closer to the truth to say that the gold standard abandoned them. The promise to redeem currency for gold reduced fiscal and monetary policy space so much that governments were impotent to deal with the problems they faced in crises and downturns. Indeed, the realization that gold was a big part of the problem meant that there was no stomach for returning to gold after WWII. Instead a sort of hybrid was created that relied on the US dollar as the international reserve currency, with the dollar pegged to gold. That system failed, too, after scarcely one generation. When the dynamics turned against the US, the gold standard abandoned Nixon. The gold standard never came back, and never will.

There was another clever alternative proposed during the Great Depression, but it was not adopted. Benjamin Graham—who is perhaps better known for the value investing strategy he taught Warren Buffet—proposed to peg currencies to a basket of commodities. The idea was that you want to anchor your currency not to one commodity (gold) but to a number of commodities that go into production of much of the consumer basket. There are two benefits to such a scheme. First, if you think of the operation of a commodity standard, it keeps the dollar price of that commodity constant as the government stands ready to buy or sell at the pegged price. Pegging the price of a precious metal like gold offers very little advantage because gold is not important to very many production processes (aside from filling cavities and adorning fingers and earlobes, and occasionally some unmentionable body parts). Hence, that provides very little in the way of price stabilization. But if you stabilize the price of the entire commodities basket that goes into producing most output (say, you include oil, corn, soybeans, pig bellies, copper, wheat, iron, and so on) then that would go a long way toward stabilizing the price of the consumer basket.

(If you think about it, there are two inputs that are essential to the production of virtually everything. What are they? Hint, think energy and human effort. More later.)

The second advantage of using a range of commodities as the buffer stock rather than just one precious metal, is that you’ve got a better inbuilt process to help resolve the problem of unemployment in downturns. When unemployment is high, you do not need to send all of it into gold mining, but, rather, labor can get busy producing all the things in the commodity basket that anchor the currency. You don’t have to rely on the luck of the draw with respect to the distribution of gold ore across the planet. You have a range of commodities, some of which can be produced almost anywhere (pig bellies). As unemployment causes wages to fall, labor gets cheap relatively to piglets so that it can be put to use to grow and butcher pig bellies that flow into the government’s buffer stock used to stabilize prices of commodities.

Of course it all works in the opposite direction in a boom—labor and prices start rising, so the government puts on the merchant’s apron and starts pushing pork. Clever, huh?

A couple of decades ago, Bill Mitchell learned about the operation of commodities buffer stocks (in his case, it was wool) and realized a third advantage: whatever you choose to serve as the commodities price anchor for the currency, those commodities will always be fully employed. Nice for the piglets (or sheep, in the Australian case).

Hmmm, wouldn’t it be better to keep humans fully employed? Retain that thought.

2.Foreign exchange

The second alternative is to peg to a foreign currency—usually the currency of a dominant nation.

We can be brief. Ask the Greeks how’s that working out for them?

The problem with a fixed exchange rate is that you lose domestic policy space. Of course some think that is good, and indeed it was the major argument for euro. We know how that turned out.

But even if you don’t like domestic policy space, a pegged exchange rate means you become dependent on exports, or on borrowing, or like Blanche DuBois on the kindness of strangers. Again, exhibit A is the EMU. Witness Germany—which relies on exports as it literally sinks all the economies of its neighbors. Witness almost everyone else: relying on borrowing. Witness Greece: the Teutonic strangers are not kind.

Now, you could argue that the EMU was extreme because it wasn’t just a matter of pegging rates but of going whole hog and adopting a foreign currency. However, the fundamental problem of pegging is that for every exporter there is an importer. Pegging can work for some well-situated exporting nations, but it necessarily creates internal instability for most others—an internal instability that cannot be remedied by fiscal policy that becomes impotent because of the currency pegging.

And it is impossible as a recommendation for all countries since you’ve got to have net importers. Most peggers peg to the US dollar, and the US is a relatively happy net importer. However, when the US catches a cold the exporters come down with influenza. So even the net exporters are subject to forces beyond their control.

3.Reserve Army of the Unemployed

Among employed economists, the favorite price anchor is unemployment (of others, of course; funny how that works). The unemployed fight inflation through their desperation as they try to bid jobs away from the employed by offering to work at miserable wages. And their utter failure to obtain work serves as a lesson to the fortunate, who will accept wage cuts and horrible working conditions to retain their jobs.

There are five main arguments for maintaining an unemployed buffer stock:

a) If you give them jobs, the poor will want to eat, which would cause inflation by driving up the price of foodstuff. Economists see the unemployed poor as inflation fighters. They perform a public service by keeping aggregate demand low so that prices don’t rise. (For example, Tom Palley complains that if a JG provides jobs to everyone, the poor will want meals, sparking inflation; see here: .)

b) If you give them jobs, the poor will want to eat, which will increase production of foodstuffs, causing more environmental damage. Ultimately, this is unsustainable. Such economists see the unemployed as doing their part to promote environmental sustainability.

Note that in either case, the poor deserve rewards, acclamation, emulation. We all ought to live that way. The problem, of course, is that many people won’t take their turn as unemployed dumpster diving inflation fighters and environmental activists.

c) Many economists and others see the threat of unemployment as a necessary labor disciplining device. Unemployment spells build character and promote entrepreneurship. (For example, Cullen Roche argues: “You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones [sic] dinner.“ I think the unintentional irony of arguing that the unemployed might kill for their dinner was lost on him; indeed, the unemployed engage in lots of anti-social behavior, including robbery, drug-dealing, and, yes, murder as they struggle to obtain “dinner”.)

Others prefer unemployment over full employment even if they do not accept the claims for the supposed benefits of unemployment.

d) One group promotes a basic income guarantee over jobs. The argument is that everyone should get as much as they need (I would say “want” rather than “need”, for otherwise an authority has to decide what they need) whether they work or not. Obviously this view is somewhat at odds with the previous three arguments for unemployment. It is also inconsistent with the search for a price anchor, so far as I can tell. I cannot follow the Bigger’s argument that this would NOT be an experiment to prove your mom wrong when she warned you that “money doesn’t grow on trees”. Your mom understood the problem. Biggers never learned the lesson.

e) Others argue that while it might be nice to have full employment, there’s no way to get there. The private sector obviously is not going to let everyone work who wants to work, so the responsibility must fall to government. However, these critics argue that government cannot implement and run a full employment program. They raise political objections as well as objections related to affordability, management of the program, lack of useful jobs, and so on.

I’m not going to say more about these final two arguments against full employment as I’m convinced both are fallacious, and because neither of these critiques offers a price-stabilizing anchor for the currency in place of the JG/ELR. So the main arguments for an unemployed buffer stock are: the unemployed help keep prices down as their incomes are low; the unemployed enhance environmental sustainability because they cannot afford to consume much, which lowers production that damages the environment; and the threat of unemployment is motivational.

4.Fully Employed Buffer Stock

Let me close with a defense of the JG/ELR as a stabilizing anchor. I’ll repeat some of the argument from the final part of the MMT 101 series that Eric Tymoigne and I posted some weeks ago.

Note from the clues scattered above, we can analyze the JG as a program that uses labor as its buffer stock. Labor goes into all output. It is a domestic resource that can be found in every nation. Providing jobs to those who want to work but cannot otherwise find paid work is consistent with an internationally recognized human right. It has many individual, familial, and social benefits that go far beyond earning an income. Keeping the labor buffer stock employed maintains that buffer stock in good shape. Enforcing idleness on those who want to work is like letting the rats invade your buffer stock of corn. A reserve army of the employed is much better than a reserve army of the unemployed as the unemployed are perceived to deteriorate in quality at a rapid pace.

The JG program is quite explicitly a “rightly distributed” spending program in which government spending is directed precisely to those who want to work but cannot find a job. This places no direct pressure on wages and prices because the workers in the program were part of the “surplus” or “redundant” labor force and are still available for private employers (at a small mark-up over the JG program wage—the minimum wage).

For that reason, employing workers in the JG program is no more inflationary than leaving them unemployed. Indeed, the JG should lower recruiting and hiring costs as employers would have an employed pool of workers demonstrating readiness and willingness to work, which should reduce inflation pressures.

Turning to effects on aggregate demand, many critics worry that if, say, 10 million people obtain jobs and thereby increase their incomes above their pre-employment levels, consumption would increase and drive up inflation. This seems to be a major concern of our critics. By logical extension, they would also worry about a private-sector led expansion that created minimum wage jobs in, say, the fast food sector. We find such a position to be overly defeatist—a “let the poor eat cake” response to unemployment and poverty.

This criticism is also often combined with the claim that workers in the JG would just “dig holes”, adding nothing to national output. Again, we see that as overly pessimistic—since a jobs program can be designed to produce desirable output, as the New Deal’s jobs programs did.

However, let us imagine that the JG program is extremely successful at creating jobs and income, so much so that the economy moves from slack to full employment of all productive capacity, resulting in rising prices. The presumed problem is that while JG workers get wages (and thus consume) they do not contribute any production that is sold (hence, does not absorb wages). The “excess” wages from newly employed workers induces spending to rise.

What could government do in that case? It would have at its disposal the usual macroeconomic policy tools: raise taxes, lower government spending on programs other than the JG, and tighten monetary policy. (We won’t get into an argument here about the relative effectiveness of these.)

Indeed, this is what government would do in the absence of the JG if the private sector achieved full employment through creation of 10 million new minimum wage jobs in the private sector. The only difference is that government would not be able to fight inflation by increasing unemployment—because the macro policies used to fight inflation would dampen demand but any worker losing a job could turn to the JG program for work.

What this means is that with a JG in place, the inflation-fighting adjustments to spending will occur among the employed rather than by causing unemployment and poverty. In other words, the costs of fighting inflation can be made to be borne at higher income levels. We are surprised that our critics appear to prefer to use unemployment and poverty to fight inflation, which forces the least able to bear more of the costs.

Our position is similar to Keynes’s: “No one has a legitimate vested interest in being able to buy at prices which are only low because output is low.” (Keynes 1964 p. 318) So while Palley argues against creating jobs on the argument that those with jobs would have more income, and this could cause what Keynes called “semi-inflation” (increased demand drives up prices in those sectors with an elasticity of output below one), that is not a defensible position. Normally, as Keynes said, a rise of effective demand “spends itself, partly in affecting output and partly in affecting price” and only if the elasticity of output approaches zero does a rise of effective demand cause “true inflation”. (Ibid p. 285) Below that point, there is no “legitimate vested interest” in keeping labor unemployed. Instead, inflation must be fought by alternative means.

It must be recognized that increasing the number of private sector workers in the fast food industry will cause the same sort of “semi-inflation”, raising prices in the same sectors that consumption by new workers in the JG program would affect. It does no good to argue that hamburger flippers are “productive” (they flip burgers) while JG workers are not (they provide, for example, public services to the aged), because the “semi-inflation” will occur in all sectors where increased spending faces anything less than perfect output elasticity.

Hence, if our critics were consistent, they would always fight against job creation if anysectors that would experience increased sales to workers had less than perfect output elasticity. Their argument against the JG is a red herring.

Note also that with a JG, the government’s budget would be made more strongly countercyclical, as government spending increases in the slump when workers move from higher-paid employment to the JG; the process is reversed in a robust expansion, where when the private sector hires out of the JG pool. These stabilizers might be enough to stabilize aggregate demand. After all, most unemployment in developed countries is cyclical in nature so unemployment is largely due to a lack of aggregate demand. The JG pool raises that demand (by paying wages) and so will encourage hiring. If not, government can use discretionary policy interventions.

Using a JG to anchor prices preserves fiscal and monetary space, since, as mentioned, the JG reserve army is domestic. An employed buffer stock is more effective at constraining wages and prices than is an unemployed reserve army because employment keeps labor in better shape. Employment also has substantial benefits for the individual, the family, and society as a whole.

Unemployment has few (questionable at best) benefits and lots of horrendous costs to individuals, families, and societies, including divorce, deteriorating physical and mental health, abuse of children and spouses, gang activity, and crime. Use of gold as the anchor ensures that gold is fully employed, but that is of questionable value. Mining gold is highly destructive of the environment and produces relatively few jobs in most countries. As William Jennings Bryan said, it ties the nation to a “cross of gold”, constraining economic growth and limiting the ability of the nation to use monetary and fiscal policy to pursue the public purpose. Tying the currency to a foreign currency throws the fate of a nation to the mercy of “kind strangers”– strangers who rarely see it in their interest to help.

Now the next time a mole asks you whether MMT requires a JG, you know how to bop the mole: ask the mole which price anchor he wants. MMTers know you must choose one. We prefer the JG over the alternatives.