MMT critics jumping the shark

18 Apr, 2019 at 10:23 | Posted in Economics | 10 Comments

jumpI was sent two papers by Thomas Palley the other day. I have known him for decades. He continually disappoints. He has become one of those self-styled Post Keynesians who are trying to destroy the credibility of Modern Monetary Theory (MMT) for reasons that are not entirely clear … He definitely has a set on MMT and regularly recycles the same sorts of attacks, which, continue to have the same problems. In other words, he does not seem to (or does not want to) learn. He also accuses those who respond of dishonesty — playing the pure is me card — although his own work on MMT fails, in part, because he deliberately (or not) refuses to acknowledge the extant MMT literature, which addresses the issues he claims are missing in the MMT approach …

When the Swedish economist Lars P. Syll wrote a critique of Palley’s latest papers (April 12, 2019) — Thomas Palley claims MMT fails to provide plausible macroeconomics — he was met with this response from Palley:

“Your blog post is misleading to the point of being dishonest.”

I didn’t find anything misleading at all with Lars P. Syll’s short overview of the problems in Palley’s work …

I only decided to explicitly address the Palley papers, not because they are important in any way, but because some of the points are still raised in E-mails I receive from readers who are acting in good faith …

But you can see why Palley avoids citing my work – because I have already written the stuff he claims MMT ignores!

William Mitchell


  1. Bill Mitchell is a disgrace to the Mitchell clan. When I tried to point out how the private sector creates new net financial assets before the central bank knows about them, he banned me without comment. Bill is not interested in financial reality.
    See a trader’s account of how $10,000 turns into $14,000 without central bank involvement:
    The key is that the $5000 in new net financial assets is backstopped after-the-fact by the Fed. Not before, as Bill erroneously claims.

    • I disagree Robert. Where does anyone state banks front load before creating anything. Your assertion that Bill banned you for your stated reasons is problematic, not like you have experienced the same else where. Might have something to do with your opening statement and propensity to ignore evidence contrary to your views, yet still push them regardless.

      If you want to delve into risk weighing and offsets one would think the tools used to judge such and the human component in utilizing them would be a more robust avenue to explore.


      • Banks very often book future expected income today, and spend it (on bonuses that are never clawed back) today. To Be Announced Mortgage-Backed Security instruments sell house loans before they close, thus providing financing for the loan that has already been sold on. Economists willfully ignore such common practices as booking future interest today. MBS are a good example of how the private sector creates new net financial assets that circulate as money today, and get bought by the Fed after the fact in a panic. The Fed bought MBS without having a pre-existing stock of reserves. The Fed created new money, after the fact, to backstop the private sector’s previous net new financial asset creation.
        Banning is the ultimate personal attack. Banning says more about William’s inability to use words effectively than it does about the person banned.

        • I think you would be interested in Blacks examination of shadow sector engagement in said asset class.

          Did not know economists was a monolithic grouping, seems the MMT – PK publicity suggests otherwise. Furthermore those like Wray and Mosler have suggested policy to curtail various practices which have a propensity to create large problems.

          Aware of asset swaps et al to curtail aggressive shorting E.g. S&L outcome elevated to international moment, albeit have issues with broader political scope post event.

          Most blogs are private, terms and conditions to entry, don’t know how you consider the administrative outcomes of such as an ultimate personal attack.


          • A ban is on a name, therefore the ultimate personal attack. You can’t comment because you are you. He’s free to ban but strong arguments are better than an ad hominem ban. MMT’s arguments against the private creation of new net financial assets without first involving the government sector are weak; their bans are a clear sign of weakness.

            • I disagree considering past episodes taken as a whole and not an individual occurrence. Furthermore I find your reasoning about weakness a projection and not a statement of facts, rhetorical E.g. special plea supported by some ideological foundation.

              In summation I find your argument about private and public confusing considering the views of people like Hernando de Soto et al.


  2. With respect.

    “Mitchell’s web-posting attacks my work yet does not link to my paper despite linking to much else”

    What does Bills lack of linking to your paper have to do with the critiques veracity of said.

    As far as the umbrage and pejoratives goes … I can for one say from experience … the amount of vulgar rhetorical pejoratives flung is a long standing SOP from those that portray themselves as economists, when in reality they are ideologues. I have no issues with those that present ideological arguments if they are framed as such, pettifoggery about groundings is both anti intellectual and unethical, complaints from the aforementioned seems a bad case of Chutzpah E.g. a group dynamic which accuses others of its own past behavior as unconscionable.

    I have quite the the opposite experience over some decades Mr Palley, MMT and PK were the only ones attempting to avoid the emotive ideological marketing PR strategy orthodox engaged in too a fault.

    I still have troubling memories of debating David Friedman.

  3. Dear Lars,

    It is very disappointing that you post this material and you diminish yourself by doing so.

    (1) Everything in my paper is referenced and logically argued. Mitchell’s web-posting attacks my work yet does not link to my paper despite linking to much else (For the benefit of your readers it is titled “What’s Wrong with Modern Money Theory (MMT): A Critical Primer” and it is available at

    (2) Mitchell appears to be suffering from “wounded ego” syndrome. He is upset I have not focused on him and have preferred to focus on Randall Wray’s writing. The reason is simple. In my view, Wray provides a more seminal statement of MMT.

    (3) Mitchell’s post actually illustrates another profound problem with MMT. His arguments match those of the critics. That shows how MMT covers both sides of the table, putting its arguments on “red” and “black”. When one criticizes red, they evasively point to black. That tactic shows MMT’s intellectual dishonesty and incoherence.

    (4) Mitchell’s posting also begins with an ugly dishonest character assassination. That is par for the course when one engages with MMT, and many others can attest to that. When one criticizes MMT, the cult responds by imposing a “fatwa” whereby they aim to suppress critics’ work. The result is a closing of intellectual space and a poisoning of the climate of intellectual exchange.

    The last point is particularly relevant to you (and Post Keynesians) as you have made the case for pluralism in economics. Many criticize mainstream economics for being anti-pluralistic. It scares me to think what the economics profession would look like if proponents of MMT were ever in charge.


    Tom Palley

    • “Mitchell appears to be suffering from ”wounded ego” syndrome.” Really???
      “When one criticizes red, they evasively point to black. That tactic shows MMT’s intellectual dishonesty and incoherence.” No evidence presented here for that statement. And we are to assume “intellectual dishonesty and incoherence” is some neutral statement of fact?
      “When one criticizes MMT, the cult responds by imposing a “fatwa” whereby they aim to suppress critics’ work.” So now I am a cult member rather than someone who has read economic arguments and has an opinion about which is better. And because I disagree with you- now I am part of some ‘fatwa’?
      Get a grip.
      Sincerely disappointed,
      Jerry Brown

    • I don’t much agree with your economic theory, but I empathize completely with your frustrations in arguing with MMT cultists!

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