Time to update/replace the Humphrey-Hawkins Full Employment and Balanced Growth Act. For one thing, even the Federal Reserve agrees that the economic tools it has are not adequate for meeting the objectives of the act. That fiscal policy tools are needed. Not to mention that the Full Employment goal should be Full Employment, not 3% Unemployment. And there needs to be recognition that not only doesn't the Fed have the tools to achieve that, but neither does Private Sector Capitalism. It is only practical for the Federal Government to do so, e.g., with an Employment Guarantee Program.

Excellent article.

MMT addicts, where would current interest rates on US government debts be without Fed’s QEs and statist regulatory favors like allowing banks to leverage their capital much more with loans to the government than with loans to the citizens?
https://subprimeregulations.blogspot.com/2013/01/the-subsidized-risk-free-rate.html

Is modern monetary economics a globally applicable "theory," or is it the description of how a few, favored giant economies such as the U.S. and China (but not even the UK or Japan) can exploit their own resources with wide latitude for deficits? Especially when a favored nation's currency is accepted as a global reserve.

Absent some external aid, no individual or nation is guaranteed subsistence. A resource-rich country like the US differs from Zimbabwe or even Russia. Any country that needs to trade internationally for essential goods depends on the faith of its trading partners in the strength of its currency. So, even as resource-poor Country A pursues fiscal policies to guarantee jobs, the number and quality of jobs are limited by its natural resources, labor supply, and available technology -- and what it has to offer in trade for what it needs. Loose monetary policy combined with redistributive tax policies and some degree of regulation of, e.g. minimum wages, would further equity. But they might not in themselves be sufficient to achieve a desirable standard of living without donated "foreign" aid.

There is a repetition and abstractness to debates over "theory" for which critics and defenders of MMT share responsibility. Size, geography, demographics will dramatically enhance or narrow the possibilities for monetary policy. It would be helpful to hear more about these practical limitations. And less about who has misunderstood what theory.

Mr. J Galbraith argument to defend MMT based in Keynes Monetary Theory to fight the Central Banks mandate with a single task of keep inflation under control, is right. The best example is as he mentions how the FED works with a dual goal and the actions taken by most Central Banks to keep the economy functioning to fight the COVID 19 pandemic. So far there is no much modern monetary theory. Keynes theory works well under a structural stagnation of private effective demand to raise employment. Another example of this is the FED action in the 2007 financial crisis with its rescue monetary package. But Keynes policy was a short term policy where there are no structural changes in the production function as the developed world is undergoing now for the last 15 years. Before the pandemic the US was in the path to full employment (a rate below 4% and no trace of inflation) under accommodative monetary policy, and no need of Keynes expansionary policy. To sum up, monetary theory in Europe needs a fresh reading of Keynes, but they must be aware when it is indeed needed and perhaps other policy changes may be overlooked.

The magic money tree works fine if all the money gets spent on "projects" with a positive return. Otherwise it will debase the currency. In reality there are not enough good projects and politics will send the money to projects that destroy capital as may be happening today with Covid-19 stimulus money. Right now freshly printed money is going to support illiquid business's many of whom are really insolvent. Thus MMT is a way for politicians to kick the can down the road and avoid the difficult decisions required to restructure. Compare money to energy. (Energy can neither be created or destroyed. It is how you use it.)

Honestly using the examples of Zimbabwe, Venezuela, Argentina or the Weimar Republic to argue against Monetary policy is quite showing of the level of understanding of the basics of money.

Money is what it does.... in all the above cases the official currencies stopped being money, so in fact what happened is that the central banks of those countries stopped having control over money supply because people started using other assets for money.

Amazing the level of ignorance at high level places in our society.

Well, in 2020 the income of households went down significantly, because many people experienced some sort of salary cuts. So if you take away 2,2 trillion from people in the form of salaries and then give 2.2 trillions in the form of aid, the total money basically hasn't changed. So, MMT can't use this argument in crisis years.

For lay persons like myself, this is quite illuminating on how MMT works: https://m.youtube.com/watch?v=iFDe5kUUyT0

With our national debt soaring above 27 trillion dollars nothing is as sobering as looking at future budgets. Several years ago our government predicted that by 2019 the national debt would top 12 trillion dollars, not the 23 trillion it hit. Global debt has surged since 2008, to levels that should frighten any sane investor because debt has always had consequences.
In 1981 Federal Reserve Chairman Paul Volcker is widely credited with ending the stagflation crisis where inflation peaked at 13.5%. Volcker did this by raising the fed fund rate which averaged 11.2% in 1979 to 20% in June of 1981. More about this subject in the article below. 

 https://brucewilds.blogspot.com/2019/10/warning-interest-rates-inflation-and.html

Magic money tree - reminiscent of the stuff Dorothy encountered in the land of the Oz. Or just an extension of the abandoning of the gold standard. Look what that that did to dollars and asset prices. A thought experiment - does that mean we can finally do away with the tax collectors for good?

If we can print our way out of any problem, then why to work? Why not push a little bit our governments to print and distribute? Who needs incentives to be productive anymore?

The founders of America had no place for Central Bankers. The current president claimed to be a Jacksonian president. But Andrew Jackson would probably shoot central bankers as he was a violent man and had no place for money printers. Also income taxers. Or a standing army. America should change its name as it no longer resembles the original America except it sits in the same geographic location. So if you are going to have central bankers giving handouts to billionaires or better stated moneyed interests then why not MMT. The government hands out food stamps, farm subsidies, ethanol subsidies, military spending pork. It’s bizarre. Right now it’s just a matter of who gets the handouts. Central bankers are in a tough spot when people are being evicted by hedge fund managers that were bailed out by central bankers.
America is a farce

Perhaps the problem has to do with theory. Perhaps one needs to approach MMT not just with neo-classical lenses, but also with institutional theory lenses. In other words, countries with good institutions will not be affected by inflation, while countries like Zimbabwe or Venezuela, lacking institutions, will develop inflation...

Thanks for this. The previous commentaries were frustratingly vague. I don’t know enough about MMT to have an opinion about it but I’d expect even its detractors to be able to clearly explain what it is and what’s wrong with it.

Here's a little link that nicely probes some real basics about book-keeping that many just either ignore, forget, or attempt to hide, Montier doesn't. Although the article is an oldie and is focused on alternatives at the time to keep income flows juiced, Montier presents the crucial basics about book-keeping that no one wants to shine any light on, even a lot of so-labelled Keynesians of any sort today. (Not referencing you Galbraith.)

https://www.scribd.com/document/34895648/GMO-Montier-26Jul

Absolute power corrupts absolutely.

http://macromomblog.com/2020/07/29/economics-is-a-disgrace/

I'm adding that little link just to be flippant about IT all!

MMT makes some sense, but not the part about free jobs for everyone. That is make work and will erode work ethic, if there still is any work ethic.