Debunking MMT, Keynesianism, Monetarism: Reader asks “What theories do you believe?”
I stated: “It’s no mystery why central bankers are mystified: Collectively, they are economically illiterate fools engaged in Keynesian and Monetarist group think.”
Reader Jon wants to know what I do believe and if I have any links.
Specifically, Jon asked: “Mish, if you are not a Keynesian nor a monetarist, what theories do you believe and do you have links or references about them?”
I subscribe to the Austrian school of economics covered in points 1-4 and 8 below.
- Economics for Real People by Gene Callahan
- Economics in One Lesson by Henry Hazlitt
- What Has Government Done With Our Money? by Murray N. Rothbard
- Case Against the Fed: Murray N. Rothbard
- Tomorrow’s Gold Marc Faber
- Capitalism For Kids: Growing Up To Be Your Own Boss by Carl Hess
- Debunking Modern Monetary Theory (MMT) & Understanding it First by Erik Zimerman
- An Introduction to Austrian Economics by Thomas C. Taylor
Items two, three, four, and eight are free downloads at mises.org. Item seven is a free website article.
Links 1, 5, and 6 go to Amazon. I get a tiny cut of the action out of Amazon’s pocket. If you prefer Amazon gets the full price, then remove my reference.
Tomorrow’s Gold is an investment book by Marc Faber, one of the best ever, but it is not about the question asked. The book appears to be out of print. The best option may be to buy a used copy.
MMT, Keynesian, Monetarism Fatal Flaws
MMT, Keynesian, and Monetarism all suffer from the same fatal flaw: They promise something for nothing, in various ways.
Brief Keynesian Rebuttal
The average 6th grader would immediately understand how absurd it is to pay people to dig ditches and other to fill the holes, but the average Keynesian believes such silliness.
The chief proponent of Keynesianism today is Paul Krugman. He believes that if you “prime the pump” economic activity feeds on itself and it becomes self-sustaining. Japan proves otherwise so do trillions of dollars in piled up US debt.
Neither Krugman, nor anyone else, has ever bothered to explain what happens when you stop paying people to dig ditches, but the result is obvious.
Brief Monetarist Rebuttal
The Monetarists believe if you cheapen money by flooding the world with it, there is a benefit. History shows that by the time access to money is readily available to the masses, major problems are at hand.
Ben Bernake and Janet Yellen, the former and current Fed chairs, are monetarists.
The results of 2000 and 2007 are in. The benefit was to the banks, the wealthy, and the political class first in line to get cheap money, at the expense of everyone else. Few people see today’s problem because the bubbles have not yet popped.
Brief MMT Rebuttal
MMT says government is different. It owes the money to itself and the debt can be canceled at will. in MMT theory, a benevolent government would spend the money wisely, cancel all the debt or pay interest to itself, and everyone will essentially live happily ever after.
I believe Ellen Brown falls into the MMT camp. So do many of those who propose a “free” guaranteed standard of living for everyone.
Erik Zimerman does a beautiful job in debunking MMT in the link provided above.
Greenspan on Free Handouts
Former Fed chairman Alan Greenspan offered a pertinent comment in January on free handouts and growth.
Alan Greenspan: “You can’t get growth going so long as entitlement expansion is anywhere near where it’s been recently. It’s eating up the sources of investment and the sources of growth and you can’t have it both ways. You cannot fund all of the entitlements that everybody wants and expect that you are going to get GDP growth out of that at three percent or more.”
Also in January, Greenspan said there was no stock market bubble. Just this week, Greenspan commented about bond bubbles. I offered this insight into Greenspan:
When Greenspan is widely ignored, as in his warning about entitlement spending, he is quite often correct.
Greenspan now says there is a bond bubble. Here is my complete reply: Bubblicious Debate: Greenspan Says “Bond Bubble About to Break”, No Stock Market Bub
Something for Nothing
Any economic theory that proposes paying people to do nothing, debt is not a problem because we owe it to ourselves, and/or there is some sort of overall economic benefit to rising prices is charlatan economics.
The average sixth grader understands it’s better to get two candy bars for a dollar instead of one, but the average Keynesian and Monetarist doesn’t.
Falling prices and higher standards of living go hand in hand as do higher productivity and falling prices.
It takes years of training to get someone to believe total economic nonsense, and that is precisely what academia provides.
On deck is another round of destructive asset price deflation, brought about by Central banks who sponsor complete economic foolishness.
Addendum: Teacher Response
Excellent post, one of your best, Mish! I have only one correction: In my experience as a teacher, even 2d graders understand the absurdity of digging holes and filling them up! More proof that young kids are smarter than adults.
Mike “Mish” Shedlock