It addresses the ‘history’, but the underlying fundamental principles of why MMT is poor theory are not addressed.
1. If there is no ‘money’, then exchange of goods/services is direct. I need bread, I can offer my service of labour. If the person offering bread does not need [my] labour, no exchange will take place.
2. If there is ‘money’, now indirect exchange can take place. I offered labour to ‘X’ for $1. I completed the labour he gave me $1. The transaction is not complete from my point of view. I have $1 ready to exchange for bread. That $1 is merely a means to an end, of obtaining bread.
3. I exchange my $1 for bread. My transaction is now complete. The baker, who received my $1, has an open transaction, the $1 standing ready to complete his desired exchange.
4. The point being: ‘money’ is a good that facilitates indirect exchange.When exchanged, it retains the ability to transact at a later date, if the goods/services desired are not then available.
5. It has an exchange value and it [to a point] acts as a store of value, its fluctuations respond to the change in availability of goods. Herein lies the theory of credit and the time value of money: another significant reality of money that is beyond the scope of this post.
6. Money is not in of itself ‘wealth’: ie. it is not a good or service that is a consumption good. Its function is to facilitate trade through the mechanism of indirect exchange.
7. For this function, the volume of money in circulation is irrelevant. Money, ‘X’ quantity, will adjust through the function of price, relative exchange ratios with all goods/services.
8. If on a desert island there is a single $1 coin that can be used to facilitate exchange between the only two inhabitants, when direct exchange is not possible, for example, I fish, but have been ill, so I have no fish currently, but, from a previous exchange I have the $1 coin: I can exchange that coin for berries, providing the coin, knowing that when I have fish, my neighbour can present the coin for some of my catch.
9. Those ratios will be fairly consistent, 3 fish for the coin +/- on availability of fish. If I have many fish, it may rise, $1 = 5 fish. Less in hard times.
10. What happens if while fishing, I catch a fish that has a second $1 coin in its entrails?
11. The money supply is doubled. All the ratios change. Less goods will be available per coin. The price has risen. That is inflation.
12. MMT through manipulating the volume/supply of money does nothing to increase the wealth of an economy. There is no more ‘sustainable’ production of consumer goods. There is only an increase/decrease in the supply of money, which is irrelevant to money performing its task – the indirect exchange of goods.
13. Even when ‘money’ flows to production goods, which is where the time value of money and credit step into the picture, there is no requirement to change the volume of money: in fact by doing so, you distort market signals and waste valuable resources.
Obviously, there is a great more detail required to fully explain the concept. Many books have been written on the subject.
jog on
duc
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