Social Democracy for the 21st Century: A Post Keynesian Perspective Thu 2010-09-30 08:12 EDT
Would Keynes have endorsed Modern Monetary Theory/Neochartalism?
...what would Keynes have thought of neochartalism/modern monetary theory (MMT)? MMT developed from Abba Lerner's theory of functional finance, as well as G. F. Knapp's theory of chartalism, as propounded in his book The State Theory of Money...MMT tells us that the government is the monopoly issuer of its own currency. Hence the government is not revenue-constrained. Taxes and bond issues do not finance government spending. No entity with the power to create and destroy money at will requires anyone to ``fund'' its spending. Having said this, one must immediately say that, even though deficits are not ``financially'' constrained in the normal sense, they do face real constraints in the inflation rate, exchange rate, available resources, capacity utilization, labour available (= unemployment level), and external balance...My discussion is based on the fundamental article by David Colander on this subject...``Lerner approached Keynes and asked: `Mr. Keynes, why don't we forget all this business of fiscal policy, public debt and all those things, and have some printing presses.' Keynes, after looking around the room to see that no newspaper reporters could hear, replied: `It's the art of statesmanship to tell lies but they must be plausible lies.' ''...
21st century; endorsed Modern Monetary Theory/Neochartalism; Keynes; Post Keynesian Perspective; social democracy.