Reply to a comment from Joymo on MMT

by Jehu

I received a comment from Joymo on one of my blog posts on modern money theory, MMT is right … which (paradoxically) is why it is wrong.

The comment begins with a quote from that blog post which accuses MMTers of doubling down on the sham of fascist state deficit spending in order to subsidize capitalist profits:

“Now, MMTers could have used their knowledge of how “modern money works” to expose this scam, but they have chosen instead to lobby for more of it.”

Commenting on this statement, Joymo writes:

I don’t think you’ve taken an honest look at the the positions of MMTers. One of the key points of MMT is that it shows that the state **doesn’t need to issue treasury bonds to finance itself at all**

Most MMTers call for an abolition of the treasury bond system and correctly equate it to “welfare for billionaires”.

I also get the feeling you haven’t fully digested the theory when you say things like: “In return for this service to the capitalist of generating riskless financial assets for them to hide their dead capital from devaluation, Washington get to consume the excess capital unproductively to build the largest military in human history.”

No, the whole point of MMT is that a powerful enough state could do this anyway, with or without the capital of the capitalists.

Joymo misunderstands my argument. I readily accept that, within certain definite limits, the state can finance its operations without taxing or borrowing. This was not the point of my post. As simple as it appears, however, the last statement by Joymo, that a powerful enough state could could build the largest military in human history, with or without the capital of the capitalists, is really quite wrong.

Joymo is suggesting that the state does not need to borrow money capital from the capitalists since it literally owns the currency in which this money capital is denominated. This is true and is demonstrated each time the state taxes the capitalists to finance its military. But what he has also neglected to mention is that aircraft carriers are not built out of money capital or tax revenue. They are built of steel and other real inputs.

In his statement, Joymo treats money capital as if this money capital is real capital — factories, machines, raw materials, etc., that is capable of creating real military means like aircraft carriers — and as if the currency the state controls is the same as the money capital of the capitalists. Of course, this is not accurate. Capital, money capital and state currency are three different and distinct categories that should never be conflated as MMTers (and economists generally) often do.

Further, while it is true that a powerful enough state could finance the construction of the largest military in human history solely by issuing its currency, it has to be acknowledged even by MMTers that we live in an open world market with relatively free movement of capital and goods. So there are serious limits to this sort of self-financing, of which four come to mind:

First, there is only a single nation-state that possesses a currency of sufficient privileged standing in global trade and commerce to function in the way modern money theory describes, the United States. There is no other nation that has the capacity to self-finance the way the United States has been able to for the last 48 years. In this sense, modern money theory can more accurately be called, “How the United States dollar works.” And, to be sure, modern money theory is not about money at all. Nothing about it could be applied to the monies — gold, silver — that have served that function in the past. It is a theory of how a currency works — and completely valid for only a single currency, the US dollar, at that.

Second, for the dollar to function in the way MMT describes, the United States must be willing to run persistent and growing trade deficits, as it has done since the late 1970s. To finance its spending solely by issuing its currency, the United States must be willing to absorb ever increasing amounts of excess surplus value from the rest of the world market in the form of dollars. These dollars take the form of massive hoards of T-bills.

Third, when the United States issues new currency to self-finance this has the obvious effect of reducing the value represented by the mass of its currency already in circulation; this amounts to continuous devaluation of its currency. The impact of this devaluation on prices denominated in dollars is obvious: price inflation.

Fourth, the excess capital absorbed by the United States from the world market may not have value in the Marxian sense, at least according to my reading of Marx’s theory. I cite this parenthetical comment added by Engels to chapter one of Capital to support this view:

“To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.”

In this statement, Engels seems to exclude the sort of pseudo-exchange transfers of the sort MMT imagines that involve printing up currency or electronic credits to vendors, etc. In the context of this discussion, excess capital has been transferred simply by an expropriation of one nation-state’s exports employing a money-like fiction. The expropriation of the excess capital by this means suggests that the excess capital are not commodities and have no value in the Marxian sense of that term.


My point in the blog post had nothing at all to do with the treasury bond system. I completely agree with Joymo that the United States doesn’t need to issue treasury bonds to finance itself at all, but I still conclude that it willingly does so despite this in order to add to the profits of capital. Some MMTers may disagree with this practice, but this is beside the point.

So, what is the point?

Let’s take the case of a government program to buy the unsold crop of farmers.

To pay for this program the state electronically credits a farmer’s accounts and receives in return the unsold corn. Now, we would both agree that the issuance of T-bills to finance the purchase of excess corn that can’t sold in the market is gratuitous and unnecessary. But it is no more gratuitous than the issuance of the fiat dollars, or electronically crediting the account of the farmer to pay for the excess corn in the first place.

The corn can’t be sold. It has no market value. Its price in the market is zero.

How is it being bought by the government at any price?

Paying any price for something that has no value makes absolutely no economic sense whatsoever, no matter how this payment is “financed.” MMT subsidizes profits not simply by paying interest on public debt that is unnecessary. It subsidizes profits by printing currency to pay for commodities (including labor power) that no longer have any market value at all.