Sunday, 5 July 2020
A poor criticism of MMT by David Glasner.
In a recent article in his “Uneasy Money” blog, Glasner says (I’ve put his words in green italics):
“For example, MMT posits that increases in taxes are deflationary and reductions in taxes are inflationary, because an increase in taxes implies a net drain of purchasing power from the private sector to the government sector and a reduction in taxes implies an injection of purchasing power. According to the MMT, the price level reflects the relationship between total spending and total available productive resources, At given current prices, some level of total spending would just suffice to ensure that all available resources are fully employed. If total spending exceeds that amount, the excess spending must cause prices to rise to absorb the extra spending.
This naïve theory of inflation captures a basic intuition about the effect of increasing the rate of spending, but it is not a complete theory of inflation, because the level of spending depends not only on how much the government spends and how much tax revenue it collects; it also depends on, among other things, whether the public is trying to add to, or to reduce, the quantity of cash balances being held.”
Well if Glasner was a better acquainted with MMT literature he’d have noticed MMTers referring again and again to what they call “savings desires”: that is the attempt / desire to accumulate money.
So MMTers are perfectly well aware of the importance of “whether the public is trying to add to, or to reduce, the quantity of cash balances being held”.