Nice metaphor. As for education, one can hardly forget to recommend the excellent billy blog from Prof William Mitchell, who basically invented teaching people about MMT over the Internet :) http://bilbo.economicoutlook.net/blog/
Paul: I'm fairly certain Fahdel Kaboub has produced some material re: monetary sovereignity among African nations. He is well worth checking out on that aspect of MMT at any rate.
also I think a few of the core MMT:ers would insist on saying that MMT isn't a set of economic policies for governments as such to adopt, apart from the Job Guarantee as an automatic stabilizer. Sure, you might adopt it as the theoretical framework through which you design specific economic policies.
Sentences like "the decision to speak Squirrelese rather than Entish is a political one" and others in this article causes the impression that you are claiming that those in power know better - they know that public finance works like MMT tells us - but they deliberately feign that they don't. I'm finding that this is a pretty common claim in the MMT community.
I'm pretty sure that this isn't the case. I personally know many people working in the banking industry and in the public sector, and they legitimately don't know any better. They indeed think that the government works like a private company in the sense that it is a money user not an issuer. The reason why they are ready to bail out banks and spend in the military is because they have their own interests in doing so.
Sure, I agree. I'm simplifying stuff. Most politicians don't know any better, albeit they often operate in a state of cognitive dissonance because they are aware of historical circumstances in which the central banks do stuff like QE, which they would see as 'creating money out of thin air'
I saw that you tweeted (forget Musk's name) this recently - I hadn't come across your substack until now!
As a convert to seeing the world through an MMT lens, the issue I often see is that the existing narrative is so strong that it makes explaining an alternative view to lay people hard to impossible. Smart people I know, throw up their hands like it's a conspiracy theory! Elsewhere, excited conversations are held in what are effectively echo chambers.
So, as an educator, my question surrounds how to get this message out in a way that allows lay people to not run in horror. That is the only way I think we will break the current narrative. Thoughts??
And, do you mind if I use parts of this post and your tweet (fully attributed of course) to try and reach more people?
Hi Riley, thanks for your comment. Of course - feel free to use parts of the post for your own efforts. My approach involves both metaphor and visual imagery, which both help in giving people a foothold towards understanding complex topics.
I also think it's important to avoid pedantic accuracy - I often get hardcore money geeks correcting me on small nuances or minor quibbles, striving to be purists in describing something, but they often don't realise that hyper-accurate descriptions will alienate anybody with lower levels of technical knowledge, which is the vast majority of the public. I'd far prefer to create stuff that is not perfectly pedantically accurate, but which is *more accurate than the mythology* and *useful* to everyday people
Ha, ha. I love this metaphor, and it work brilliantly with the "money doesn't just grow on trees" belief. I have tried to write about MMT using Smurfs and I also tried inventing a new word: Econsplaining. It's inspiring to see how you have done it since it's hard to convince people that their idea of the structure of money is faulty in a short article!
MMT is interesting but it seems like a top-down centralized approach. You mentioned the nuance of individual banks creating their own credit, If I am not mistaken, the Bank of England published a paper in 2014 stating that over 90% of total purchasing power is in fact private company credit extended by banks. If that is the case, why would there be a need for one big tree in the center rather than many small and medium trees all around?
Professor Werner, a man who, among many things coined the term QE, wrote this interesting paper showing how we do not need central banks but instead can rely on a decentralized banking system.
Hi Serge, as I mentioned in a response to someone else above, MMT is not in the first instance a policy - rather it is an analytical framework to analyse policies. Thus, when you say it is 'top-down and centralized', that's because our monetary system is top down and centralized, and that's what MMT is analyzing. It is a descriptive account of the state element of a large-scale monetary system, which can in turn lead to prescriptive accounts of what policies a money issuer should adopt, but not necessarily - for example, highly conservative monetary policies can be analysed through an MMT lens (and so too can decentralised ones).
In terms of bank money creation, that entire system is connected into the state money system (the 'big tree'), but is collectively larger. Richard Werner has been doing analysis on that for a long time. But for the purposes of this piece I thought it would be confusing to try map bank money creation onto the tree metaphor, but in my visualizations (e.g. the Money in Orbit) piece, the banks can be clearly viewed as a separate set of issuers
Squirrelese uses acorn-concept-thinking to hide, that there are no more acorns for squirrels as they knew them and squirrels are no more the ones to handle acorns. They themselves are derivatives of the real squirrels (=banks) handling only derivatives of the real acorns (=reserves).
Fantastic article. The metaphors really helped me. As a UBI enthusiast i’m curious as to how a clear-speech nation or state can operate with ‘straight’ MMT when all about are continuing to spin the facts and mislead their populace. Any thoughts?
Glad you like it Sally. I don't actually have a clear answer to that - I would, however, like to work on a piece in which I translate common misleading 'squirrelese' phrases used by governments into their accurate 'Entish' form, and from there perhaps see how such phrases could be presented and received
Not a bad way to describe money - I'll use that! Thanks. On MMT my feeling is that only governments with currencies in demand can practice MMT - obvs the $. If the £ tried alone I suspect there would be a run on the £. More importantly for me is what you think might happen if the Mozambican Central Bank issues Metacaix as a basic income to its population? I value MMT as a better way to think about money but am sceptical as to how far it can be used internationally.
Hi Paul, many people say things like 'X country can't do MMT', as if MMT were a policy, rather than an analytical framework to analyse policies, but the first point about MMT is that it is - in the first instance - a descriptive account of how a view a monetary system rather than a prescriptive account of what policies a money issuer should adopt.
To extend the metaphor I used in the article, pointing out that an oak tree issues acorns (and that squirrels struggle to see that from the perspective of an oak tree) is not the same as saying an oak tree must constantly issue acorns. The former is a descriptive reality, while the latter is a prescriptive policy.
In that sense, MMT can indeed be used to describe the Mozambiquan central bank, but that doesn't mean that central bank has the same leeway as the US federal reserve to engage in money issuance.
Thanks Brett - I suppose I should have been more specific - I guess Mozambique can practice MMT but not with nearly the same impact as USA etc. I really like thinking about money and you've been an inspiration.
Nice metaphor. As for education, one can hardly forget to recommend the excellent billy blog from Prof William Mitchell, who basically invented teaching people about MMT over the Internet :) http://bilbo.economicoutlook.net/blog/
Thanks Tristan - great resource
Here for more analogies about gatling guns and fantasy creatures!
Paul: I'm fairly certain Fahdel Kaboub has produced some material re: monetary sovereignity among African nations. He is well worth checking out on that aspect of MMT at any rate.
also I think a few of the core MMT:ers would insist on saying that MMT isn't a set of economic policies for governments as such to adopt, apart from the Job Guarantee as an automatic stabilizer. Sure, you might adopt it as the theoretical framework through which you design specific economic policies.
For sure - Scott Fullwiler makes that latter point well here https://www.researchgate.net/publication/228121184_Modern_Monetary_Theory_-_A_Primer_on_the_Operational_Realities_of_the_Monetary_System
Sentences like "the decision to speak Squirrelese rather than Entish is a political one" and others in this article causes the impression that you are claiming that those in power know better - they know that public finance works like MMT tells us - but they deliberately feign that they don't. I'm finding that this is a pretty common claim in the MMT community.
I'm pretty sure that this isn't the case. I personally know many people working in the banking industry and in the public sector, and they legitimately don't know any better. They indeed think that the government works like a private company in the sense that it is a money user not an issuer. The reason why they are ready to bail out banks and spend in the military is because they have their own interests in doing so.
Sure, I agree. I'm simplifying stuff. Most politicians don't know any better, albeit they often operate in a state of cognitive dissonance because they are aware of historical circumstances in which the central banks do stuff like QE, which they would see as 'creating money out of thin air'
I saw that you tweeted (forget Musk's name) this recently - I hadn't come across your substack until now!
As a convert to seeing the world through an MMT lens, the issue I often see is that the existing narrative is so strong that it makes explaining an alternative view to lay people hard to impossible. Smart people I know, throw up their hands like it's a conspiracy theory! Elsewhere, excited conversations are held in what are effectively echo chambers.
So, as an educator, my question surrounds how to get this message out in a way that allows lay people to not run in horror. That is the only way I think we will break the current narrative. Thoughts??
And, do you mind if I use parts of this post and your tweet (fully attributed of course) to try and reach more people?
Great work, by the way....
Hi Riley, thanks for your comment. Of course - feel free to use parts of the post for your own efforts. My approach involves both metaphor and visual imagery, which both help in giving people a foothold towards understanding complex topics.
I also think it's important to avoid pedantic accuracy - I often get hardcore money geeks correcting me on small nuances or minor quibbles, striving to be purists in describing something, but they often don't realise that hyper-accurate descriptions will alienate anybody with lower levels of technical knowledge, which is the vast majority of the public. I'd far prefer to create stuff that is not perfectly pedantically accurate, but which is *more accurate than the mythology* and *useful* to everyday people
Exactly, useful to everyday people - that is the way to spread understanding. I know myself, if the language gets overly complicate I drift away.
Thanks.....
Ha, ha. I love this metaphor, and it work brilliantly with the "money doesn't just grow on trees" belief. I have tried to write about MMT using Smurfs and I also tried inventing a new word: Econsplaining. It's inspiring to see how you have done it since it's hard to convince people that their idea of the structure of money is faulty in a short article!
https://medium.com/@heatherdavis_27231/the-smurfs-and-modern-monetary-theory-mmt-7ffe31edc10?sk=731ed6efbab4d1f37198f997447a6058
https://medium.com/@heatherdavis_27231/ladies-protect-yourself-from-econsplaining-c5f916d16d1f?sk=21499f2b533077d599b582e44f708ea6
Thanks Heather! I'll check out your articles
I liked the post , thanks.
MMT is interesting but it seems like a top-down centralized approach. You mentioned the nuance of individual banks creating their own credit, If I am not mistaken, the Bank of England published a paper in 2014 stating that over 90% of total purchasing power is in fact private company credit extended by banks. If that is the case, why would there be a need for one big tree in the center rather than many small and medium trees all around?
Professor Werner, a man who, among many things coined the term QE, wrote this interesting paper showing how we do not need central banks but instead can rely on a decentralized banking system.
https://professorwerner.org/shifting-from-central-planning-to-a-decentralised-economy/
Hi Serge, as I mentioned in a response to someone else above, MMT is not in the first instance a policy - rather it is an analytical framework to analyse policies. Thus, when you say it is 'top-down and centralized', that's because our monetary system is top down and centralized, and that's what MMT is analyzing. It is a descriptive account of the state element of a large-scale monetary system, which can in turn lead to prescriptive accounts of what policies a money issuer should adopt, but not necessarily - for example, highly conservative monetary policies can be analysed through an MMT lens (and so too can decentralised ones).
In terms of bank money creation, that entire system is connected into the state money system (the 'big tree'), but is collectively larger. Richard Werner has been doing analysis on that for a long time. But for the purposes of this piece I thought it would be confusing to try map bank money creation onto the tree metaphor, but in my visualizations (e.g. the Money in Orbit) piece, the banks can be clearly viewed as a separate set of issuers
Squirrelese uses acorn-concept-thinking to hide, that there are no more acorns for squirrels as they knew them and squirrels are no more the ones to handle acorns. They themselves are derivatives of the real squirrels (=banks) handling only derivatives of the real acorns (=reserves).
Fantastic article. The metaphors really helped me. As a UBI enthusiast i’m curious as to how a clear-speech nation or state can operate with ‘straight’ MMT when all about are continuing to spin the facts and mislead their populace. Any thoughts?
Glad you like it Sally. I don't actually have a clear answer to that - I would, however, like to work on a piece in which I translate common misleading 'squirrelese' phrases used by governments into their accurate 'Entish' form, and from there perhaps see how such phrases could be presented and received
Useful - https://gimms.org.uk/mmtbasics/
Not a bad way to describe money - I'll use that! Thanks. On MMT my feeling is that only governments with currencies in demand can practice MMT - obvs the $. If the £ tried alone I suspect there would be a run on the £. More importantly for me is what you think might happen if the Mozambican Central Bank issues Metacaix as a basic income to its population? I value MMT as a better way to think about money but am sceptical as to how far it can be used internationally.
Hi Paul, many people say things like 'X country can't do MMT', as if MMT were a policy, rather than an analytical framework to analyse policies, but the first point about MMT is that it is - in the first instance - a descriptive account of how a view a monetary system rather than a prescriptive account of what policies a money issuer should adopt.
To extend the metaphor I used in the article, pointing out that an oak tree issues acorns (and that squirrels struggle to see that from the perspective of an oak tree) is not the same as saying an oak tree must constantly issue acorns. The former is a descriptive reality, while the latter is a prescriptive policy.
In that sense, MMT can indeed be used to describe the Mozambiquan central bank, but that doesn't mean that central bank has the same leeway as the US federal reserve to engage in money issuance.
Thanks Brett - I suppose I should have been more specific - I guess Mozambique can practice MMT but not with nearly the same impact as USA etc. I really like thinking about money and you've been an inspiration.
Hi Paul, one worthwhile piece to read the first couple pages of Scott Fullwiler's primer here https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1723198, where the descriptive/prescriptive distinction is spelled out. Cheers!