Frances Coppola now an MMTer?

Two passages in this article of hers on government debt are very MMT compliant. First:

“Thus, buying a government bond is exactly the same as placing money in a government-insured time deposit account in a bank. We should really regard government bonds as certificates of deposit. They are simply money, in another form.”

Incidentally Martin Wolf made very much that point where he said:

“Central-bank money can also be thought of as non-interest-bearing, irredeemable government debt. But 10-year Japanese Government Bonds yield less than 0.5 per cent. So the difference between the two forms of government “debt” is tiny…”.

Another point which MMTers keep making is that the state should issue enough government debt and base money to satisfy what MMTers often call the private sector’s “savings desires”.

And to give credit where credit is due, the latter point amounts to much the same as Keynes’s point about the paradox of thrift: i.e. that increase saving (in the form of storing up money) raises unemployment. Thus the state absolutely has to satisfy the private sector’s desire to save - save money that is.

As Frances Coppola puts it:

•  Running a sustained absolute surplus robs the private sector of its savings
•  Paying off government debt deprives the private sector of a safe store of value.

The only thing slightly wrong with the latter two sentences is that it assumes savings have to come in the form of “debt” rather than base money (which normally pays no interest).

MMTers get that right when they refer to “Private Sector Net Financial Assets” (PSNFA), which is the sum of government debt and base money. 

As to whether PSNFA should be made up primarily of zero interest yielding base money or primarily of interest yielding money / debt, that’s a separate question. Milton Friedman and Warren Mosler proposed a “zero debt” regime.

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Stop press: Simon Wren-Lewis puts in a good word for MMT.




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