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Monetary Realism and MMT

January 25, 2012

Hi Everyone,

Cullen Roche has a post up over at Pragmatic Capitalism about a new project we’re working on together. The recent back and forth about the Job Guarantee brought a bit of clarity to my thinking, and I think to many others too. I don’t fully support the Job Guarantee, and it’s clear the founders of MMT believe the JG is essential to MMT.

We’re starting an “offshoot” of MMT which we’re calling Monetary Realism. We’re massively indebted to the work of Mosler, Fullwiler, Kelton and the rest. We’re standing on the shoulders of giants.

But we’re not fully “in paradigm” (as they say), and we don’t want people to be confused that we are a source for pure MMT. We are not pure MMT. We do not want to undermine the work of the developers of MMT.

And, I want to be 100% clear – we are not against the mainstream MMT movement.

We just want to focus more on the insights of Warren Mosler, and what it means for the economy. We want to use these insights to make millions of lives better. Focusing on the operational realities will bring even greater recognition of those ideas, which should pave the way for a better functioning economy.

We have several other differences in focus as Cullen writes:

1. We side with Godley on the current account issue.
2. We view the state theory and the “taxes drive money” idea as incomplete.
3. We will focus more on productivity as a compliment to consumption as opposed to mainly looking at ways to increase aggregate demand.
4. We reject the JG as a central component of understanding the modern monetary system.

Still, we share a ton of common ground with MMT purists. Let’s not forget we grew up reading Mosler’s comments section.

The blog itself isn’t up yet, but it will be soon.  www.monetaryrealism.com  We’ll let you know when it is up.

Here’s one final note: We’re going to take the operational realities of modern money and put it everywhere. Everywhere.


Categories: Main
  1. Phil
    January 26, 2012 at 7:25 am

    Bring it on.

    Seriously, this approach sounds just like what I’ve been looking for since I learned about MMT over a year ago. I’m looking forward to reading more.

    Phil Gomez

    • TC
      January 26, 2012 at 8:57 am

      Excellent Phil,

      We think the unrelenting focus on the accounting and operational ideas will bring these ideas into the mainstream quickly.

      In 5 years, the operational realities of MMT will be widely accepted as self-evident. And that’s going to make hundreds of millions or even billions of lives better very quickly.


      • January 27, 2012 at 9:28 am

        “We think the unrelenting focus on the accounting and operational ideas will bring these ideas into the mainstream quickly.”

        Yes, and I suggest you guys use a motto (kind of like Warrens “there is no financial crisis deep enough that a tax cut or increased defict cant cure”) along the lines of;

        “If you cant get the accounting right, you cant get the economics right”

        • TC
          January 27, 2012 at 9:52 am

          Agreed. Good idea.



          Sorry so short! I am on my iPhone!

  2. Dunce Cap Aficionado
    January 26, 2012 at 9:38 am


    If you want any help cramming the ORs down people’s throats, consider me on call.


    • TC
      January 26, 2012 at 9:45 am

      You’ll get your marching orders in a few weeks. 😉 lol. We’re going to take this huge, huge, huge.

      • Dunce Cap Aficionado
        January 26, 2012 at 9:57 am

        I’ve always said you have a great mindset for ‘marketing’ ideas. I’m excited!

        • TC
          January 27, 2012 at 8:02 am

          Nothing happens until something gets sold. I’ve come to appreciate this idea over and over.

  3. Kenneth
    January 26, 2012 at 3:10 pm

    Re: We will focus more on productivity as a compliment to consumption as opposed to mainly looking at ways to increase aggregate demand.

    That should be “complement,” not “compliment.”

    • TC
      January 27, 2012 at 12:19 pm


  4. Greg
    January 26, 2012 at 3:23 pm

    If I may be so presumptuous to think you desire my input, I’d like to suggest a motto;

    “If you don’t get the accounting right the economics will always be wrong” or “One can get the accounting right and still get the economics wrong but not vice versa”

    • January 27, 2012 at 9:28 pm

      Well I see the comment I made form my i phone was a little delayed in getting posted. Sorry I posted this suggestion twice TC.

  5. beowulf
    January 27, 2012 at 11:55 am

    Law 26, The Game is to be Sold, Not Told.


    • TC
      January 27, 2012 at 11:59 am

      I also like #32, turn a tramp into a champ.

      and lest we forget, #21

      A Ho Without Instruction Is Headed for Self-Destruction

  6. reslez
    January 27, 2012 at 9:31 pm

    “Productivity” with no transmission mechanism to the consumer just means padding profits. So what exactly do you guys have to offer the 99%? Yet more GDP growth at the expense of the middle class? We’ve had three decades of that already. What’s the point of producing more apples to put on the shelf if only the 1% can afford them? You’re cheerleading yet another economic system that shortchanges We, The People.

    In a finite resource world “focusing on productivity” is a losing bet. And the political reality will just mean corporate welfare and tax cuts. (The good news is your policy prescriptions will be quite popular… among the 1%.) I’m not saying JG is the perfect solution. But there are real, tested mechanisms for the government to manage aggregate demand. That must take priority.

    This path was utterly predictable. I hope you’ll be part of the solution, but the jury’s still out.

    • reslez
      January 27, 2012 at 9:37 pm

      This is not to mention an economic system that has no use for 10-20% of the workable population is completely bankrupt. By failing to admit to the utter insanity of unemployment your theory starts from a position of moral and ethical vacuum. Cheers! 🙂

      • beowulf
        January 27, 2012 at 11:45 pm

        The Koch Brothers certainly aren’t paying us to be unpredictable! (a factually true statement, incidentally)

        If you’d spend less time beating up strawmen and instead bothered reading TC’s back posts, you’d know he’s very interested in the issue of such transmission mechanisms, the bloated FIRE sector, reforming the Federal Reserve, income inequality and lowering unemployment.
        You not doing your homework shortchanges We, The People.

        • January 28, 2012 at 1:58 am

          Sill boils down to whether you use an unemployed buffer or an employed buffer, and what the compensation rates will be to those systemically excluded.

          It’s job guarantee, income guarantee or elimination by starvation. Which one is it to be?

      • TC
        January 28, 2012 at 8:20 pm


        Please see my reply to Neil. I’d add one thing to that response to Neil for clarity on how I operate: I consider it a moral imperative to help people when they need it. Morals are only good as far as you can use them to take useful action. they are useless thoughts without real world action.

        The JG precludes legislative action on all of MMT’s insights, because it’s a political abatross if you can’t convince my wife with zero explanation. She’s the perfect target audience, the perfect test of viability, someone to who we shouldn’t need to explain the program. The JG is not a politically viable idea for the next decade, that is unless things get much much worse, and I will not wish for massively increased human misery that a better and more moral society *might* emerge from ashes of civilization.

    • TC
      January 28, 2012 at 8:23 pm

      Our very first public plans contain plans to lower payroll taxes. Bucky Fuller argues part of the Critical Path is to increase productivity in a finite resource would, and I agree with RBF. “Ephemerlization” or doing more with less IS the solution to finite resources.

  7. beowulf
    January 28, 2012 at 3:11 pm

    If them are our choices, Income guarantee definitely. Hard to beat Milton Friedman’s negative income tax concept.

    “[HEW Secretary] Caspar Weinberger, proposed on behalf of the Ford administration the Income Supplement Plan (ISP), a comprehensive negative income tax proposal that would replace all existing welfare programs. The proposal ensured that a “family would no longer both pay taxes and receive benefits at the same time, but instead would have either a tax liability or eligibility for a transfer”.

    • January 29, 2012 at 1:58 am

      It is easy to beat it, because it doesn’t work.

      We call it ‘Tax credits’ in the UK, and during the run off period it creates marginal tax rates of over 70% on income in the mid range – so people working harder end up with no more money in their pocket after expenses.

      So unsurprisingly they stop working since money is a motivator at the low end.

      The only system I see working is a Universal Pension – where all jobs are subsidised to the same living amount by the state. All the way up the stack. (ie an income guarantee for those working, unless exempted from working by reason of age or infirmity).

      That gives capitalism the ability to push the private wage to zero – which is essentially what capitalists want – without any artificial tax distortions.

      • beowulf
        January 29, 2012 at 12:06 pm

        Weinberger’s plan had a phase out rate of 50% (inclusive of taxes). At the low end of the income scale it could be paid by (and/or rebated to) the employer as a wage subsidy.

        • January 29, 2012 at 1:54 pm

          The wage subsidy system was tried as well. It was an administrative nightmare and the basis of a great deal of fraud and cash flow issues (particularly amongst small employers), and the system was reverted to central payment as a monthly benefit based on the previous year income.

          The new Universal Credit idea is trying to make this more ‘Real Time’ by requiring employers to report time sheets information into the Pay as You Earn system so that Credits can be tuned on a weekly basis. But they are sticking with a

          The phase out mechanism is really off putting for the lower end staff, who simply can’t understand why they are working their socks off, but don’t seem to have any more money.

          “In 2004-05, the estimated employment rates of lone parents who were receiving CTC were around 11 percentage points lower than those of eligible non-recipients with a similar chance of receiving CTC. Mothers in couple families who were in receipt of CTC had an 8 percentage points lower employment rate, on average, than comparable non-recipients.”

          CTC is Child Tax Credit.

        • beowulf
          January 29, 2012 at 3:49 pm

          “The new Universal Credit idea is trying to make this more ‘Real Time’ by requiring employers to report time sheets information into the Pay as You Earn system so that Credits can be tuned on a weekly basis. ”

          Well there you go. We can just let the UK work out the kinks and by the time payroll tax cuts reach the point of diminishing returns (somewhere between 3% to 4% U3 rate), we can adopt Universal Credits here to provide a guaranteed income for low income workers and the (for whatever reason) unemployable.

        • January 30, 2012 at 2:18 am

          I hope not. Universal Credit is subsidising existing employers who produce crap jobs. Only by making labour scarce are you going to drive technical innovation (assuming you can control inflation). Making it cheap is only a short term solution to the employment problem as FoxConn show in China.

        • beowulf
          January 30, 2012 at 8:39 am

          I see, you really want me to pick “starvation” didn’t you?

  8. TC
    January 28, 2012 at 3:57 pm


    The JG is a political millstone. Here’s a story which will make this 100% clear to you.

    When we started this little splinter group, of course, I talked about it with my wife. I told her I was breaking off from MMT. Of course, she was shocked. She asked – don’t you really like Mosler and those guys you met downtown in Chicago a few weeks ago? I said yes, but I don’t fully support one of the programs.

    Now before I tell you the rest of the story, you must know these facts.

    I live in Oak Park Il. which is almost certainly the most progressive non-college city in the midwest. (ex. my 10yr son is going to a friends bday party today – the friend with 2 moms) We moved here in part for that reason. We’re quite liberal. My wife is more liberal than I am.

    My wife was an english/womens studies major in college.

    She’s jewish.

    In other words, my wife is about as liberal as you can get.She doesn’t follow the issues, she’s a normal, but really liberal mom.

    So she asks:

    -well, what don’t you agree on.
    -It’s called the Job Guarantee.
    -A Job Guarantee. If you can’t find a job, you can go work for the government, they guaran—-

    This is where she cuts me off and says something I never imagined she would consider saying. She says:

    -I don’t support that at all. It sounds like Communism to me.

    Now, this is my wife. She’s more liberal than I am. She’s more liberal than nearly everyone I know. A woman who is proudly liberal, someone who most people in the united states would think is probably a communist, thinks this program is too extreme from the most basic description you can imagine.

    I wasn’t even trying to make her not like the JG – this was a totally passing conversation I wasn’t even focusing on.

    I was pretty sure I was doing the right thing before my conversation with her. But when she said that, well, the decision is obvious.

    The JG is a political millstone around the neck of MMT.

    Supporting the JG without compromise delays the adoption of programs which will help hundreds of millions of U.S. citizens, and by extention the demand which helps billions of people around the world.

    • January 29, 2012 at 1:43 am

      So Starvation then.

      • January 29, 2012 at 2:28 am


      • TC
        January 29, 2012 at 8:16 am


        You are the one choosing starvation. You have a political stance that all but “guarantees” there will be no action on it.

        This is the crux of the matter. Action.

        One of my points is it’s irrelevant if the JG works or is more moral than unemployment. The presence of a JG in MMT delays adoption of other, probably far more effective programs, by a decade or more.

        During that decade or two, people are still starving. Not wanting them to starve is entirely different from taking action to prevent them from starving.

        Then, you should do the math.

        10 million JGers * $16,000 is only 160 billion.

        Payroll taxes are 6% of GDP. That’s 840 billion. My TC rule would inject $1t+ total and put $600bn+ dollars into workers hands over the next year if it was directed to the payroll tax, plus giving non-financial company business owners a massive boost too.

        The TC rule would increase demand in the U.S. by roughly 7-8 times the amount of the JG this year.

        So there are other other programs which have far greater impact on consumer demand and create more jobs.

        So just to recap:

        1. The JG is a complete political non-starter in the U.S.
        2. Advocating for the JG delays the adoption of far more effective programs

        Someone is promoting starvation, but it’s not me.

        It’s you.

        • January 29, 2012 at 11:43 am


          Where have I mentioned MMT style Job Guarantee in this thread? I’m pushing you on the design for those systemically excluded by a simple tax cut mechanism.

          I don’t doubt what you’re doing is pragmatically the right approach for your political framework, but the rule you put forward is going to be dynamically unstable when labour markets get tight. Unemployment rates differ in the different labour markets. It’s not smooth.

          So you’re going to have to start with a large safety margin if you’re looking at keeping stable inflation. And that means more people staying unemployed for longer.

          Dynamic tax rates have the same problem as dynamic interest rates. Very difficult to tune and target.

    • January 29, 2012 at 2:14 am

      ” If you can’t find a job, you can go work for the government, ”

      I hope you’re not in sales with that line.

      The federal government doesn’t create jobs.

      The federal government pays the minimum wage for up to a maximum amount of hours for certain types of jobs created by certain types of other entities. Note this definition covers negative income tax/Tax credit designs/private sector job subsidies which are a form of Job Guarantee.

      The alternative is that the federal government pays the minimum wage for a set amount of hours for doing nothing. This covers unemployment compensation and non-reciprocated income guarantee designs.

      Or the final solution is starvation. I hope we’re not going here.

      It’s a question of picking the categories to use and designing the programme for that category. If you ignore it, then people end up in the final category by default – as that is the natural state of capitalism: eliminate the excess population in a slump.

      • January 29, 2012 at 2:29 am

        Actually that’s not quite right.

        Even unemployment compensation and NR Income guarantee designs are people being hired to do a job – and that job is to spend the money and signal to the production system to produce something for them.

        Otherwise it won’t.

    • Sergei
      January 29, 2012 at 2:01 pm

      “-I don’t support that at all. It sounds like Communism to me.”

      So what?! It is great when people having no clue about communism have such a strong conviction. That is as conservative as it can be regardless of the city you live in. Just make a claim. But you can equivalently turn it around and say “it sounds like capitalism”. So what?! We, human beings, ourselves define our morality. In some cultures it is perfectly normal to eat your partners for breakfast. Is it liberal or not? Wolves can eat their own kids because survival of parents can be more important to the society than kids. Is it liberal or not?

      “The JG is a political millstone around the neck of MMT.”

      Only because WE define what is a neck and what is the stomach. Is it theoretically possible to have JG or not? Is it possible, just for a second, to consider such a possibility and its requirements with an open mind?

      Sorry, but your wife is irreparably conservative and all this bla-bla-bla about liberalism is just that. Bla-bla-bla. It is just my opinion that counts.

      ps. I am just teasing you and your wife here 🙂

  9. January 29, 2012 at 1:14 am

    First I haven’t read the current comments yet.
    Second, I agree the JG is prescriptive.

    Take the JG out of Monetary Realism and it is nothing more than MMT.

    I believe the trade deficit idea is the same as Ramanan’s Balance of Payments criticism of MMT, please correct me if I’m wrong.

    However, by balancing the trade deficit as suggested it does fall straight for the fallacy of composition argument as what if all other countries did it? We’d all be isolationists.

    The rest is just a description of operational realities which is MMT. It seems quite pointless to me.

    I note TC has lower unemployment proposals for the US on this site (TC rule), I would like to know if those ideas are to be incorporated into Monetary Realism?

    Without a proposal to lower unemployment (assuming that is a goal), the default assumed is support for the status quo.

    Supporting the status quo or the way things were before (status quo ante) is the very definition of a political Conservative.

    There is nothing wrong with being Conservative but being able to justify the position is important.

    So in short if you’re just going to stick to the operational realities of MMT – what’s the point? It seems quite pointless without prescriptions.

  10. January 29, 2012 at 1:26 am

    And now having read TC’s latest comment, it is nothing more than an American cultural thing and God knows how arse-backwards you are with political culture. I find it amusing that the US electoral system is slightly more progressive than the UK one. I digress.

    Explained in simplest terms I grant the JG is troublesome politically speaking but a layman’s explanation of it is not a political framing of it to sell it to the masses.

    You didn’t even attempt to sell it to your wife as you admit. However, it is clear that is because it is a bugbear for you. I understand that position but starting from the position of defeat is hardly saleable.

  11. January 29, 2012 at 2:16 am

    I was just over at Rogue Economists and saw TC’s comment:

    “We have the TC rule and Beo’s unemployment/payroll tax link. However, we need more work on fiscal rules, how they work, where they hit.”

    Good. This answers my earlier question. However you need lots more fiscal rules otherwise you’re deliberately keeping some of the involuntarily unemployed, unemployed, and that’s just insulting.

    I applied Beo’s unemployment/GST idea to my own country which I thought may be impossible, it’s not, there is a small scope for it there but it is definitely politically harder to implement than the JG here.

    On the JG I don’t think you guys understand how decentralised it can be but you’ve all ready made up your mind there.

    • beowulf
      January 29, 2012 at 12:35 pm

      The only way a Job Guarantee could function, operationally or politically, in the US is something like Morgan Warstler’s proposal.
      There is an easy way to do JG and win full support of the GOP, I call it Guaranteed Income…
      Simply, we provide a GI via a debit card (think like $200+ a week) and registration system like Paypal, and then force the 30M who sign upfor “free money” to have their labor weeks auctioned locally in an Ebay style auction starting at $40 ($1 per hour) to PRIVATE INTERESTS.
      I provide a sliding pay schedule I show off here:


      Note it is actually MORE generous than minimum wage, and even with 40M recipients the costs are smaller than what we currently spend in UI, welfare, and the other handouts.
      The upside is GINORMOUS. Think through what happens to property values in the ghetto with super cheap handimen available. Or single mommies who can suddenly get shared daycare for $50 a week.

      Let’sfirst get the unemployment down to 4% with tax policy and then we can wipe up the remainder with Warstler’s ebay hiring hall. For some reason Morgan isn’t universally loved and esteemed in the MMT community even though he’s the one guy with a realistic plan to create a Job Guarantee.

      • January 30, 2012 at 5:54 am

        “For some reason Morgan isn’t universally loved and esteemed in the MMT community even though he’s the one guy with a realistic plan to create a Job Guarantee.”

        Have you read all the guys posts? He’s a thug. But Ill forget the ad hominem and simply address his point the best I can. I dont like his plan because it simply gives businesses a chance to fire someone and replace them with a cheaper employee.It drives the cost of labor to just above the $200/week.I dont see how it ADDS to the labor force at all, simply redistributes. I might be wrong but thats how I see it.
        Anything that completely relies on private sector decisions to hire will be fraught with this problem. A business wont (and shouldnt) hire more people unless they have more demand, not because they can get someone on the cheap.

        Seems to me that ONLY the currency issuer can create a new customer form whole cloth by providing them with income they didnt previously have. If this is done as intelligently as possible it wont be as disruptive as it might be. But it will NEVER be neutral or completely non disruptive, in some sense of the word. There will be some businesses who will raise prices in the face of new demand and others that wont………… so what……. that s the case today too.

  12. January 29, 2012 at 4:38 pm

    I thought the proposal was a joke when I first read it and I still do. It may be workable with your modification.

    None of this debate would occur if it was said from the outset that Monetary Realism is based on American political reality (as you guys perceive it) and is applicable solely to the United States of America.

    Initial Comments that explained that it is based on politics and not mechanics and there would be zero debate discussion.

    The odd person might have talked about shifting the Overton window but that’s about it.

    • beowulf
      January 29, 2012 at 5:39 pm

      Geez, its like you and Neil want us to go back in time and set up a special stipulation (re: US political constraints) just for you guys Luckily, I received a time machine for Christmas (“Inertial Frame Dragging Time Reactor” is what the box says)… OK problem solved. We’ve achieved zero point debate discussion (no pun intended).

      Also we should take into account national differences. Neil is from the UK and Senexx is from Australia, two countries that have long provided universal healthcare, have less income inequality and have broader safety net programs in place for their poor that we do.
      Its a matter of picking your battles, apparently in the US its unavoidable being labeled a big government socialist for believing every citizen has a right to medical care regardless of their income (which sooner or later will entail a universal Medicare system), so there’s no way out of that fire but through it.
      On the other hand, a JG (in the US) would encounter avoidable political obstacles. If there’s a way to boost AD and get the unemployed working that can be done without tripping over fears of big government, then its only prudent to do so (lulling the public so, unbeknowest-like, we can sneak in the healthcare death panels).



  13. January 29, 2012 at 10:05 pm

    If it is only applicable to the US, it needs to be made explicit. That it is a discussion of politics that needs to be made explicit. Ultimately unrelated to the mechanics. That is the point.

    If it is to be applicable to sovereign economies, some of the description needs to go up a level of abstraction so it can be shown that it is a transferrable concept to sovereign economies.

    We can see that retroactively (as in created prior to MR establishment) with the TC rule & Beo Rule.

  14. beowulf
    January 29, 2012 at 10:30 pm

    some of the description needs to go up a level of abstraction so it can be shown that it is a transferrable concept to sovereign economies.

    Why is that? Its like saying you can’t sweep your own front porch unless you promise to sweep everyone else’s front porch as well.

    I say, let everyone sweep in front of his own door, and the whole world will be clean (OK Goethe said that first).

  15. gf
    January 30, 2012 at 1:52 am

    This just sounds like another sellout to the right which never compromises on anything.

    Don’t think I can go along.

    • beowulf
      January 30, 2012 at 8:35 am

      I’m with you on that, we can do without a JG. My point is if one was adamant on a JG, that’s what a functional system would like.

  16. January 30, 2012 at 12:04 pm

    I’m trying to get you to think about what you’re doing when designing this sort of system.

    If you don’t have something solid in at the beginning, then it will be quietly filed in the ‘too difficult’ category once you’ve got the majority of people back at the casino.

  1. January 27, 2012 at 12:31 pm
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