Green Party and MMT
The group calling themselves Real Progressives is hosting a webinar with Warren Mosler, the originator of MMT, on January 5th inviting Greens to attend. We thought it might be a good time to review Green Party history regarding MMT, Modern Monetary Theory. We may share many of the fiscal priorities of the people who subscribe to MMT who we think must be unaware of what Dennis Kucinich and other Congressmen through history discovered, namely that any government that doesn’t issue the money is controlled by those who do. It is a basic function of a sovereign government that has been usurped by a cabal of huge international banks.
Green monetary policy has been denigrated on Facebook and numerous other online economic forums by MMT advocates strangely hostile to Greening the Dollar, and Greens have been blocked from various discussion forums they control. However, there is a growing mountain of evidence that what Green monetary reformers are saying is right and a growing number of videos, TED Talks, and new monetary reform organizations are spreading the message, “the people want their money system back.”
In 2018 a few MMT advocates within one small state Green Party made 6 platform proposals attempting to change Green economic policy and remove Greening of the Dollar which were rejected by the National Committee. Here is New York Green Sue Peters presenting the story at the American Monetary Institute's International Conference on Monetary Reform in November of that year.
Now Mr. Mosler wants to address Greens to help them “better understand federal finance and how this knowledge can impact their ability to craft legislation.” Since MMT does not propose changing this archaic monetary system, it means our elected government will continue to borrow all its money from private banks at interest instead of exercising its sovereign authority to create and issue the nation’s money as it sees fit.
Here are a number of articles from other Greens about MMT. I think these viewpoints will help Greens take the distortion out of Warren Mosler’s single-point perspective.
"THE EMPEROR HAS NO CLOTHES” Warren Mosler, founder of MMT
Warren Mosler considers himself “The Center of the Universe” (title of one of his websites). Warren Mosler is a multi millionaire banker and hedge fund founder who is the pied piper of Modern Monetary Theory (MMT). For over 25 years, he has gathered and funded a bunch of university trained enthusiasts, who enhance their academic prestige in Mosler sponsored programs in the U.S. and Europe. They also have gained noticeable mass media attention (as fears of a nearing economic recession or crash expose cracks in the system).
Warren Mosler was born in Manchester, a suburb of Hartford, CT in 1949. In 2022, he will be 73 years old. Bachelor’s degree in economics at University of CT in 1971. Democratic Party affiliation before 2006, Independent since then a CAREER: Banker in CT, NYC, and Chicago at various corporations.
1982: founded family of hedge funds called Illinois Income Investors Strategies which invested in government securities, mortgages backed securities, LIBOR swaps and LIBOR caps, and in the financial futures markets.
In mid-1990s, he left the company over disagreements on direction of some of these investments. Warren’s financial strategy was based on his developing economic theories. For instance, shorting (betting against) Treasury bonds when many bond traders thought bond prices would spike due to increased scarcity as US Treasury paid down US federal debt in later 1990s as Pres. Clinton created unusual budget surpluses. But Mosler also lost money when Russia defaulted in 1998. Mosler later claimed these losses were caused by the fixed exchange rates Russia used at the time. 1985-2013: Failed entrepreneur as maker of Mosler race cars costing $195,000.
1990s: Mosler formulates his financial ideas into an economic theory called CHARTALISM, later made more hip and enticing as Modern Monetary Theory (MMT). Early 2000s: Relocated to US Virgin Islands in the Caribbean to obtain subsidies in government sponsored “economic growth initiatives”. Also, bought an office complex on the island for $5 million, whose building cost was at least $15 million. The complex was once considered as the island’s state Capitol building. Mosler owns and operates Valance Corp. on St. Croix, US Virgin Islands. 2003: Mosler funded various economic programs and annual conferences in U.S. and Europe in secondary, hinterland institutions where his money could provide stipends to grad students, gain momentum and legitimize his theories. Mosler money funded a research center in Switzerland and the Center For Full Employment and Price Stability at Univ. Of Missouri (Kansas City), and aided the Levy Center at Bard University. Professor Stephanie Kelton was at the University Of Missouri before moving to SUNY Stony Brook on Long Island, NY. She was profiled in New Yorker Magazine (8-20-19) with the accurate and revealing MMT “solution”: “JUST PRINT MORE MONEY”
The Nation Magazine (5-8-17) published a favorable article on MMT which included a description of how Mosler began courting economist professors and grad students in the US. “Mosler finagled a meeting with (former Bush II War Secretary) Donald Rumsfeld in the steam room of Chicago Racquet Club.” No date is given, but Rumsfeld was War Sec. from January 2001 to December 2006. This meeting with Rumsfeld probably occurred sometime in 2007 or after. Rumsfeld led Mosler to Arthur Laffer, the right-wing economist who created the “Laffer Curve”, which Reagan used to justify cutting taxes on the 1% and corporations. This “trickle down economics” was promoted as a way to stimulate GDP, and supposedly lead to higher tax revenues. Laffer connected Mosler with his future collaborator economists Mark McNary, L. Wrandall Wray, Bill Mitchell, and Stephanie Kelton.
Sympathetic economists also include Tyler Cowan and NY Times columnist Paul Krugman. Professor Kelton and others describe that when they first heard the ideas of Warren Mosler, they completely disagreed. But, it seems they were won over at future conferences as the money flowed. 2010: Mosler made half-hearted efforts to run for CT Governor, but never collected enough signatures, nor got on the ballot. He also considered running for US President in 2012 as a JFK liberal Democrat with similar results. Mosler tailors his presentation to his audience, refusing to be pigeonholed. To a talk at the ultra conservative von Mises Institute of Austrian Economics in Auburn, Alabama, Mosler was advertised on 2-22-19 as “MMT Superstar Warren Mosler to explain — not to debate — his understanding of MMT.”
In 2018, Mosler appeared in the amateurish “Volition Science” show with interviewer Dylan Moore on You Tube. The 1 hour, 11-minute interview is meandering and confusing, but Mosler makes clear his fundamental ideas at the end:
US economy is starving for money. The federal deficit ($1 Trillion) and thereby federal debt ($22 Trillion) is way too small.
Deficits are the source of US money supply and US prosperity and must grow continuously.
Mosler would eliminate practically ALL US taxes, especially all taxes on corporations.
He would support a tax on housing, cigarettes, alcohol and a tax or ban logging in rain forests.
SUMMING UP THIS PROFILE: In a future crisis, Wall St and the 1% will need such a false theory as MMT to corral, manipulate, and confuse mass anger into safe alternatives in which the big bankers continue to rule and average people remain powerless.
Why You Should Look Beyond Modern Monetary Theory
After reading an article about information that was presented to the Lavender Caucus recently by a proponent of the Modern Monetary Theory (MMT), I recognized the need to provide an explanation to the members of the Green Party of the United States of the difference between the “teachings” of MMT and the real need for monetary reform as contained in the Green Party platform. This need for an explanation was further illustrated by a press release published recently on the Green Party website wherein the Green Party of Pennsylvania espoused “reformation of our economic model” in accordance with MMT. Obviously, Green Party members are eager to have information about the best way of funding the Green New Deal, and the best reforms needed for that funding. I have also had a couple of Green Party members tell me that they thought that MMT was part of the Green Party platform. It is not.
The Banking and Monetary Reform Committee is developing a number of teaching tools for use by GP-US members and candidates that explain the need for monetary reform. Until those teaching tools are developed and distributed, we at least need to publicize the need for caution in adopting a minority economic model like MMT. The proponents of MMT have been attacking the GP-US platform on monetary reform – probably because they do not want to have attention drawn to the immediate need for monetary reform, and their own omission of dealing with it in their model of economic reform. It is common practice for most economists to ignore the monetary system. The elite in power do not want the knowledge about the system widely known.
In the article mentioned above, Giovanna Laine, who presented MMT information to the Lavender Caucus, claims that the U.S. government “does not need to tax or borrow money to fund spending.” However, under our present monetary system, the U.S. government would not be able to spend at all without taxing or borrowing. The MMT talking points deliberately omit the fact that the government does not directly create new money, but delegated that function to the commercial banks when it passed the Federal Reserve Act of 1913. An explanation of this process is beyond the scope of this article, but many resources are available for further information. The U.S. has a debt-based monetary system.
The government funds its spending by issuing and selling bonds when it does not have sufficient funds to make payments as they come due, thus creating debts along with the obligation of paying interest on the debts (interest that compounds in perpetuity, unless it is paid off). MMT proponents attempt to obscure this reality by preceding statements with a phrase like “In a country that controls its own currency . . .”, and pretending that the statements that follow presently pertain to the U.S. when they do not. Dr Stephanie Kelton uses this tactic. This confuses those followers of MMT like Giovanna Laine, who stated to the Lavender Caucus that our government “literally creates its own currency out of nothing.” This statement is false. Giovanna Laine either does not understand or does not want others to believe that the US handed over its authority for creation of nearly all new money to commercial banks.
Dr. Kelton defines the national debt as “nothing more than a historical record of all of the dollars that were spent into the economy and not taxed back, and are currently being saved in the form of Treasury securities.” Dr. Kelton attempts through this statement to minimize a present state of crisis caused by the ever-increasing US government debt. MMT omits any discussion of the negative effects of increasing government debt.
The main thrust of MMT is an attempt to show that deficits don’t matter – that governments can spend as much as they want on whatever they want without adverse effects. Although MMT does acknowledge the possibility of increased inflation, it overlooks the effects of cumulative interest paid out annually on government debts. And it also overlooks who actually benefits from savings in the form of Treasury securities.
Interest on the outstanding public federal debt is the fastest-growing part of the federal budget, and is projected to reach $479 billion in fiscal year 2020 (Oct. 1, 2019 through Sept. 30, 2020). As of December 31, 2018, seventy-four percent of the public national debt was held by foreign investors and governments, mutual funds, banks, the Federal Reserve, and insurance companies. Ten percent was held by pension funds and local government, leaving only sixteen percent for other investors. It is obvious that the added debt to the government is of little benefit to the general population, as it is held primarily by the financial sector. It adds to the extreme wealth inequality in the US, which in turn adds to the rise in poverty. Obviously, the 42 million Americans living in poverty do not benefit from any saving of Treasury securities.
In our present monetary system, 97% of new money is created by commercial banks when they make loans. Besides this power to create money, banks also decide to whom the loans should be made. This in effect also adds power to create wealth inequality. Banks collect interest on all the loans that are made with the new money they create. And recessions are created when banks cut back on lending, thereby limiting the amount of new money in circulation. This power of private banks resulted in the economic crash in 2008, which shifted much wealth to the already wealthy segment of the population.
The Green Party platform presents a well-thought out plan that through legislation both removes from the commercial banks the power to create new money, and gives back to the government its Constitutional right to create debt-free money. Proponents of this reform support the idea that the government should be able to spend on programs necessary to promote the general welfare by spending new money directly into the economy. But until legislation is passed to implement reforms it is not possible for the government to do this without creating deficits that add to the already out-of-control national debt. While MMT acknowledges a need for some reforms, which it characterizes as “long term solutions,” it is obvious to advocates of monetary reform that MMT is using misleading tactics in an effort to retain our present monetary system indefinitely as the status quo. This is evident through the use of obfuscating methods and terminology in presenting its “theory.” And the effectiveness of this method is evident when its followers show little or no understanding of the present monetary system, and present information about the current monetary system that is patently false. This is not surprising as MMT has the financial backing of those who would benefit from the status quo. Professors of economics tend to favor the economic theory preferred by donors to their institutions.
We can continue in monetary system that causes the continual growth of national debt and wealth inequality, or we can urge Congress to take back its Constitutional power to create money, which would be real monetary reform. The Green Party platform proposes reforms to replace our detrimental debt-based monetary system
The problems with our monetary system and the solutions in the Green Party platform are explained in more detail at: GreensForMonetaryReform.org
For more information on money creation see:
Also, see this Report from the IMMR International Conference on Monetary Reform