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MODERN MONEY SEMANTICS OR ‘HORSES FOR COURSES’
If you read as avidly as me the various contributions from those who over the years have developed and popularised Modern Monetary Theory, you can’t fail to observe differences between them in emphasis and in the use of language. Even Warren Mosler, Bill Mitchell and Randall Wray don’t always express themselves in the same terms as each other. And why would you expect them to do so, in any case? They generally have good reasons for choosing the language they use.
Extending things a bit to relative non-entities like me, and maybe you too, I don’t think we should all be forced to select from a set of approved terms, or that this is even possible. We should all be encouraged to explain ourselves as clearly and as concisely as we can, but where we are discussing complicated issues to be ‘concise’ does not necessarily mean to express yourself in one or two paragraphs. Bill Mitchell, for example, writes at length on a daily basis, but is always concise, at least in my opinion. He is not one to waste words, or to waste his readers’ time.
To me, an obsessive search for definitively the right word or expression you so often see rehearsed on MMT websites is a waste of energy. This doesn’t mean that I am unaware that the inappropriate use of terminology can act as a barrier to communication. It just means that I think the search for an acceptable list of words, or way of phrasing arguments, is pointless. Communicating MMT to the public is more complicated than that, and different language, different metaphors and different arguments are appropriate in different contexts and for different audiences.
Semantics, if that is the right word, is after all an even less exact science than economics. Almost every term carries associations with it which are potentially misleading, in a particular context, of if not misleading, off-putting or a distraction to the logical argument the user of the world is trying to convey.
My plea is for us to avoid pointless arguments with each other, or outsiders, about what are trifles, and to concentrate on clear, simple explanations of MMT, avoiding an over-reliance on single sentence statements. And if you personally wouldn’t use the words another modern monetary theorist is using to convey a point, or if you are slightly frustrated that a prominent MMT economist won’t use the words you would like them to employ, then please cut them some slack. They genuinely might have good reasons for their style of argument which you haven’t yet fully understood. Or it might just be that communicating MMT as effectively as we can is something nobody knows the best way of achieving, and that different readers might react positively to different ways of framing modern money. It could even be that certain words suit the writing style or way of speaking of certain authors.
What am I on about? Let me list a few examples.
1) The very name of the school of thought, to start with something innocuous.
It has been called ‘Modern Monetary Theory’ or MMT or Modern Money Theory.
Many people have agonised over this. Various alternatives have been offered, including Soft Currency Economics, Mosler-economics, Neo-Chartalism, Modern Money Mechanics, etc..
All these terms can be criticised, for one reason or another. My favourite among them is Mosler’s Soft Currency Economics, but even this one has a flaw. MMT describes how money works both with a soft currency (as in a floating exchange rate) and with a hard currency, in that is describes what is necessary for monetary sovereignty, but also the consequences and dangers of sacrificing monetary sovereignty. As for Mosler-economics, genius though Warren Mosler is, only Keynes gets a school of thought (or in JMK’s case, several schools of thought) named after him. If we name MMT after an MMT-ist (even Warren), we will be viewed as cranks, and we have to be very careful to avoid giving our opponents any opportunity to mischaracterise us as such.
However, to return to my point, if somebody wants to use the term soft currency economics, or functional finance, or neo-chartalism, and they are not doing so to mislead, and they explain themselves clearly, and they are advocating for a MMT-frame for macroeconomics, then I don’t think it is necessary to argue over what we call our school of thought.
But in any case, like the qwerty keyboard, I think the naming of Modern Monetary Theory is a settled issue.
2) ‘Taxes do not fund government spending’
Let’s start by agreeing that it is not necessary for the (monetary sovereign) government to raise additional taxes, or for that matter to issue additional government securities, in order to increase its spending.
We no doubt also agree that money is ‘that which is necessary to pay taxes’ and that taxation is necessary to create space in the economy for non-inflationary government spending.
We all know that a target for a balanced budget, or any fiscal target defined in financial terms and without reference to the state of the economy, is not only unnecessary but foolish.
Bearing all this in mind, it is perfectly accurate for someone to say, as I might say, that ‘taxes do not pay for government spending’. It is fine to say this, as long as you at the same time explain that this does not mean that we don’t need to have taxes, or that the government can spend without limit without causing inflation.
It is also perfectly acceptable for another modern monetary theorist to say that in a sense taxes do ‘fund’, or at least facilitate, spending. I believe this is fine, as long as they also explain that this ‘funding’ simply involves negating what would otherwise be the inflationary consequences of government spending, and that this does not mean you have to tax before you can spend, or that the government can ever run out of its own currency.
Do you see how misunderstandings can arise? Both the above ‘frames’ are equally valid, in my opinion. They are really a question of taste, or perhaps dependent on the audience you are trying to address. We should not jump in too quickly to criticise someone choosing a slightly different frame to us, to express essentially the same truth.
3) ‘Government debt is not debt, but better thought of as money’ versus ‘all money is debt’.
Randall Wray, among others, has often said that all modern money is debt. Of course, this is exactly right. Another term for debt is ‘financial liability’. All money is financial liabilities: not all financial liabilities are money. A financial liability is a claim someone has on you for cash in the future.
Currency itself is a financial liability of the currency-issuer. In a modern financial system, this financial liability is a liability of the broadly-defined government sector (defined to include the central bank, which is either legally or at least effectively – in the US, for example – part of the government). It is a liability, in this case, which is only ‘repayable’ in other units of itself (you can swap old currency for new currency) or via the extinction of private sector liabilities to the government (e.g. the payment of taxes). The reserves of the banking system at the central bank are also liabilities of the currency issuer.
Currency plus bank reserves defines base money. Other measures of the money supply ae dominated by commercial bank deposits. These are the liabilities the banks have to us. We accept them as money because the banks promise to pay our bills and taxes using their reserves at the central bank, and also because we can use these deposits to repay our debts to the banks.
Other financial liabilities, like a debt I owe to you, will probably not be accepted as money, since they do not have the same status as bank deposits. They are further down the hierarchy of debt, and are both less liquid and more risky to own. So not all financial liabilities are money, but all money is financial liabilities.
It is a failure to understand the essential nature of modern money which is one of the weaknesses of the positive money/sovereign money movement, which I am sure we are aware has nothing significant in common with MMT.
So, yes, clearly Randall Wray is right. Well, obviously. You would expect him to be.
However, you will sometimes see people, including me, writing ‘government debt is not really debt at all, but is better thought of as a form of money’.
Do these statements contradict each other? Who is right and who is wrong? Surely they can’t both be right?
No. Both. They can.
The word ‘debt’ is just being used in a different context here, as something which has to be repaid to prevent insolvency. In this context, if you have a debt now, you must reduce your future spending, or increase your future income, in order to repay the debt, and the interest on the debt. If you can’t do this, you will run out of money and go bust.
We all know though, don’t we, that a monetary sovereign government cannot be forced to default on ‘debt’ it has issued in its own currency. It can never run out of its own currency. It does not even need to issue such debt. It does not need to borrow at all. It creates money as it spends, and is not forced to drain this money from the financial system by issuing debt. The issuance of debt by a monetary sovereign government is entirely voluntary. The government may ‘borrow’ as one possible way to manage interest rates, or to provide fund managers in the private sector with safe financial assets to invest in, but it does not need to borrow, and it cannot run short of its own money.
That’s why I prefer to call monetary sovereign government securities a form of money, rather than to use the word ‘debt’ to describe them. This reflects the associations and metaphors that the word ‘debt’ evokes, in the context of government net spending. I would go further, myself, and stop issuing such securities at all. I would replace them with central bank term deposits. No-one would regard these as government debt, and yet they are effectively the same thing as government bonds, as Warren Mosler has often said. It might, hopefully, change the discourse as far as public finance and fiscal policy are concerned.
I hope it is clear, however, that this in no way contradicts the Randall Wray/Hyman Minsky statements that ‘all money is debt’.
All money is debt? Sure.
Government debt isn’t best seen as debt, but as money? Sure.
It is partly a matter of taste and partly a matter of context which of the above you choose to say. Yu just have to explain yourself clearly.
4) ‘Private banks create almost all money’ versus ‘only governments and central banks create money’.
This genuinely does look like a weird one, but it really isn’t. Once again, it is context, context, context. And it is about precisely what you choose to define as money.
Private banks do create most of what is defined as M1 or M2 in the USA, or M1 and M3 in Australia, because these measures of the money supply are mainly comprised of the deposit liabilities of the private banks. Please note that the banks cannot create these without limit, as they have to have reserves of equity capital against the risks they are taking (these equity reserves are nothing to do with the reserves they hold at the central bank, in fact are on the other side of the balance sheet, and this is not the time and place to explain what they represent). However, the banks can and do ‘create money’ every time they lend to a customer, because they ‘type into existence’ deposit liabilities for themselves at the same moment they make a loan. They do not need to receive deposits before the lend: they lend deposits into existence.
Such deposit money created by the banks is often called ‘horizontal money’ in MMT. It involves lending within the private sector. It does not add to the net financial assets of the private sector. It can only temporarily facilitate an increase in private spending, because it adds to the burden of private debt at the same time that it creates new ‘money’.
Private banks create ‘horizontal money’. However, they do not and cannot create ‘vertical money’. Vertical money is the base money I described above. It only includes financial liabilities of the currency issuing central bank – currency in circulation, plus reserves at the central bank. Private banks are able to crate ‘horizontal money’ only because they have access to ‘vertical money’ created by the central bank. Only the central bank and the central government can create vertical money. The central bank can lend it into existence, but only the central government can perform the fiscal function of spending it into existence. Only the monetary sovereign government can add to the net financial assets of the non-government sector – initially by net spending new vertical money into the system, although much of that vertical money is then converted into government securities later on, under the current system.
But then, I have already explained that monetary sovereign government debt securities are better seen as a form of (vertical) money than as a form of debt.
So if you see Ellis Winningham, or me, saying that essentially only the monetary sovereign government can create new money, and you see other people saying that most money is created by the private banks, guess what?
Both statements are right – the first one is about ‘vertical money’ and the second is about ‘horizontal money’.
It is all about context.
5) ‘Fiscal Policy Is outlined in the Government Budget’ versus ‘the word ‘budget’ should not be used in the context of a monetary sovereign’.
Another hard one, this. Bill Mitchell prefers to refer to the Government Fiscal Statement these days, rather than use the word ‘budget’ because the word ‘budget’ makes people think of households, who have to balance their budgets over time, which is of course a misleading and pernicious metaphor.
Bill is right – of course, he is. He is my intellectual inspiration, If you ever see me disagreeing with Bill, at least where economics is concerned, I virtually guarantee I will be wrong. I have learned this from past experience.
There again, people are very used to the word ‘budget’ in the context of fiscal statements, and governments themselves use the term. Moreover, which we MMT-ists understand that ‘budgets’ for most governments will be in deficit most of the time, we still understand that items of government expenditure, including the job guarantee, must be carefully planned and ‘budgeted’ for, as they involve significant real resources. Bill himself has in the past published ‘fantasy budgets’, as in his fiscal plan if he was in government on ‘budget day’.
As long as you explain why you are avoiding the word ‘budget’, if that is wat you choose to do, and as long as you explain that monetary sovereign government budgets do not ever have to be balanced , if you choose to use the term ‘budgets’ in this context, it is fine.
Once more, it is a matter of personal taste, and I am no wise enough to know for sure which use of language is more effective. But you feel you are wiser than me, then at least be kind to those you disagree with, and don’t assume they have not given this issue a lot of thought already.
At least, don’t assume they have never thought about this issue.
6) That word ‘deficit’.
‘Deficit’ implies a shortage, or that something is lacking. You might have thought this was an easy issue to deal with. Surely, you may argue, we can eliminate the word ‘deficit’ from our MMT vocabulary.
But you might be wrong.
Bill Mitchell avoids the word ‘budget’ these days, for the very good reason I mentioned above, but still talks about ‘fiscal deficits’.
I keep seeing people questioning the use of this word in MMT, and arguing we should refer to a ‘fiscal injection’, or ‘government net spending’, or ‘a non-government surplus’, instead.
Well, sure. I agree. But……
In Godley’s sectoral balances model, which is at the heart of MMT, and the stock-flow consistent macroeconomic models developed from it, for every financial surplus, there must be a deficit. So, yes, the ‘non-government surplus’ is equal to the ‘government deficit’, but they are not the same concept. It may be that ‘deficit spending’ by the government can best be described as causing the ‘non-government surplus’. Sometimes, desired private sector savings will drive up the non-government surplus, and this will have been facilitated by the government’s willingness to run a fiscal deficit, to support the economy while the private sector net saves.
You see what I mean, I hope. Once more, it is all about context, and the argument you are trying to pursue.
With some audiences, you might like to steer them away from the use of the word ‘deficit’ I the context of net spending by a monetary sovereign government, for the reasons I have stated.
But there will be occasions when the term ‘deficit’ is almost indispensable.
It is, at least, a question of judgement, and to an extent even a matter of taste.
All I would ask of everyone is that they not get frustrated or disappointed when another modern monetary theorist uses different terminology, and especially when they use words of which you disapprove. Give them the credit for having thought through the language they are using, and try to understand why they have chosen a particular frame for their exposition of modern monetary theory to their target audience.
https://www.facebook.com/groups/mmt75/permalink/1530876316946716/
If you read as avidly as me the various contributions from those who over the years have developed and popularised Modern Monetary Theory, you can’t fail to observe differences between them in emphasis and in the use of language. Even Warren Mosler, Bill Mitchell and Randall Wray don’t always express themselves in the same terms as each other. And why would you expect them to do so, in any case? They generally have good reasons for choosing the language they use.
Extending things a bit to relative non-entities like me, and maybe you too, I don’t think we should all be forced to select from a set of approved terms, or that this is even possible. We should all be encouraged to explain ourselves as clearly and as concisely as we can, but where we are discussing complicated issues to be ‘concise’ does not necessarily mean to express yourself in one or two paragraphs. Bill Mitchell, for example, writes at length on a daily basis, but is always concise, at least in my opinion. He is not one to waste words, or to waste his readers’ time.
To me, an obsessive search for definitively the right word or expression you so often see rehearsed on MMT websites is a waste of energy. This doesn’t mean that I am unaware that the inappropriate use of terminology can act as a barrier to communication. It just means that I think the search for an acceptable list of words, or way of phrasing arguments, is pointless. Communicating MMT to the public is more complicated than that, and different language, different metaphors and different arguments are appropriate in different contexts and for different audiences.
Semantics, if that is the right word, is after all an even less exact science than economics. Almost every term carries associations with it which are potentially misleading, in a particular context, of if not misleading, off-putting or a distraction to the logical argument the user of the world is trying to convey.
My plea is for us to avoid pointless arguments with each other, or outsiders, about what are trifles, and to concentrate on clear, simple explanations of MMT, avoiding an over-reliance on single sentence statements. And if you personally wouldn’t use the words another modern monetary theorist is using to convey a point, or if you are slightly frustrated that a prominent MMT economist won’t use the words you would like them to employ, then please cut them some slack. They genuinely might have good reasons for their style of argument which you haven’t yet fully understood. Or it might just be that communicating MMT as effectively as we can is something nobody knows the best way of achieving, and that different readers might react positively to different ways of framing modern money. It could even be that certain words suit the writing style or way of speaking of certain authors.
What am I on about? Let me list a few examples.
1) The very name of the school of thought, to start with something innocuous.
It has been called ‘Modern Monetary Theory’ or MMT or Modern Money Theory.
Many people have agonised over this. Various alternatives have been offered, including Soft Currency Economics, Mosler-economics, Neo-Chartalism, Modern Money Mechanics, etc..
All these terms can be criticised, for one reason or another. My favourite among them is Mosler’s Soft Currency Economics, but even this one has a flaw. MMT describes how money works both with a soft currency (as in a floating exchange rate) and with a hard currency, in that is describes what is necessary for monetary sovereignty, but also the consequences and dangers of sacrificing monetary sovereignty. As for Mosler-economics, genius though Warren Mosler is, only Keynes gets a school of thought (or in JMK’s case, several schools of thought) named after him. If we name MMT after an MMT-ist (even Warren), we will be viewed as cranks, and we have to be very careful to avoid giving our opponents any opportunity to mischaracterise us as such.
However, to return to my point, if somebody wants to use the term soft currency economics, or functional finance, or neo-chartalism, and they are not doing so to mislead, and they explain themselves clearly, and they are advocating for a MMT-frame for macroeconomics, then I don’t think it is necessary to argue over what we call our school of thought.
But in any case, like the qwerty keyboard, I think the naming of Modern Monetary Theory is a settled issue.
2) ‘Taxes do not fund government spending’
Let’s start by agreeing that it is not necessary for the (monetary sovereign) government to raise additional taxes, or for that matter to issue additional government securities, in order to increase its spending.
We no doubt also agree that money is ‘that which is necessary to pay taxes’ and that taxation is necessary to create space in the economy for non-inflationary government spending.
We all know that a target for a balanced budget, or any fiscal target defined in financial terms and without reference to the state of the economy, is not only unnecessary but foolish.
Bearing all this in mind, it is perfectly accurate for someone to say, as I might say, that ‘taxes do not pay for government spending’. It is fine to say this, as long as you at the same time explain that this does not mean that we don’t need to have taxes, or that the government can spend without limit without causing inflation.
It is also perfectly acceptable for another modern monetary theorist to say that in a sense taxes do ‘fund’, or at least facilitate, spending. I believe this is fine, as long as they also explain that this ‘funding’ simply involves negating what would otherwise be the inflationary consequences of government spending, and that this does not mean you have to tax before you can spend, or that the government can ever run out of its own currency.
Do you see how misunderstandings can arise? Both the above ‘frames’ are equally valid, in my opinion. They are really a question of taste, or perhaps dependent on the audience you are trying to address. We should not jump in too quickly to criticise someone choosing a slightly different frame to us, to express essentially the same truth.
3) ‘Government debt is not debt, but better thought of as money’ versus ‘all money is debt’.
Randall Wray, among others, has often said that all modern money is debt. Of course, this is exactly right. Another term for debt is ‘financial liability’. All money is financial liabilities: not all financial liabilities are money. A financial liability is a claim someone has on you for cash in the future.
Currency itself is a financial liability of the currency-issuer. In a modern financial system, this financial liability is a liability of the broadly-defined government sector (defined to include the central bank, which is either legally or at least effectively – in the US, for example – part of the government). It is a liability, in this case, which is only ‘repayable’ in other units of itself (you can swap old currency for new currency) or via the extinction of private sector liabilities to the government (e.g. the payment of taxes). The reserves of the banking system at the central bank are also liabilities of the currency issuer.
Currency plus bank reserves defines base money. Other measures of the money supply ae dominated by commercial bank deposits. These are the liabilities the banks have to us. We accept them as money because the banks promise to pay our bills and taxes using their reserves at the central bank, and also because we can use these deposits to repay our debts to the banks.
Other financial liabilities, like a debt I owe to you, will probably not be accepted as money, since they do not have the same status as bank deposits. They are further down the hierarchy of debt, and are both less liquid and more risky to own. So not all financial liabilities are money, but all money is financial liabilities.
It is a failure to understand the essential nature of modern money which is one of the weaknesses of the positive money/sovereign money movement, which I am sure we are aware has nothing significant in common with MMT.
So, yes, clearly Randall Wray is right. Well, obviously. You would expect him to be.
However, you will sometimes see people, including me, writing ‘government debt is not really debt at all, but is better thought of as a form of money’.
Do these statements contradict each other? Who is right and who is wrong? Surely they can’t both be right?
No. Both. They can.
The word ‘debt’ is just being used in a different context here, as something which has to be repaid to prevent insolvency. In this context, if you have a debt now, you must reduce your future spending, or increase your future income, in order to repay the debt, and the interest on the debt. If you can’t do this, you will run out of money and go bust.
We all know though, don’t we, that a monetary sovereign government cannot be forced to default on ‘debt’ it has issued in its own currency. It can never run out of its own currency. It does not even need to issue such debt. It does not need to borrow at all. It creates money as it spends, and is not forced to drain this money from the financial system by issuing debt. The issuance of debt by a monetary sovereign government is entirely voluntary. The government may ‘borrow’ as one possible way to manage interest rates, or to provide fund managers in the private sector with safe financial assets to invest in, but it does not need to borrow, and it cannot run short of its own money.
That’s why I prefer to call monetary sovereign government securities a form of money, rather than to use the word ‘debt’ to describe them. This reflects the associations and metaphors that the word ‘debt’ evokes, in the context of government net spending. I would go further, myself, and stop issuing such securities at all. I would replace them with central bank term deposits. No-one would regard these as government debt, and yet they are effectively the same thing as government bonds, as Warren Mosler has often said. It might, hopefully, change the discourse as far as public finance and fiscal policy are concerned.
I hope it is clear, however, that this in no way contradicts the Randall Wray/Hyman Minsky statements that ‘all money is debt’.
All money is debt? Sure.
Government debt isn’t best seen as debt, but as money? Sure.
It is partly a matter of taste and partly a matter of context which of the above you choose to say. Yu just have to explain yourself clearly.
4) ‘Private banks create almost all money’ versus ‘only governments and central banks create money’.
This genuinely does look like a weird one, but it really isn’t. Once again, it is context, context, context. And it is about precisely what you choose to define as money.
Private banks do create most of what is defined as M1 or M2 in the USA, or M1 and M3 in Australia, because these measures of the money supply are mainly comprised of the deposit liabilities of the private banks. Please note that the banks cannot create these without limit, as they have to have reserves of equity capital against the risks they are taking (these equity reserves are nothing to do with the reserves they hold at the central bank, in fact are on the other side of the balance sheet, and this is not the time and place to explain what they represent). However, the banks can and do ‘create money’ every time they lend to a customer, because they ‘type into existence’ deposit liabilities for themselves at the same moment they make a loan. They do not need to receive deposits before the lend: they lend deposits into existence.
Such deposit money created by the banks is often called ‘horizontal money’ in MMT. It involves lending within the private sector. It does not add to the net financial assets of the private sector. It can only temporarily facilitate an increase in private spending, because it adds to the burden of private debt at the same time that it creates new ‘money’.
Private banks create ‘horizontal money’. However, they do not and cannot create ‘vertical money’. Vertical money is the base money I described above. It only includes financial liabilities of the currency issuing central bank – currency in circulation, plus reserves at the central bank. Private banks are able to crate ‘horizontal money’ only because they have access to ‘vertical money’ created by the central bank. Only the central bank and the central government can create vertical money. The central bank can lend it into existence, but only the central government can perform the fiscal function of spending it into existence. Only the monetary sovereign government can add to the net financial assets of the non-government sector – initially by net spending new vertical money into the system, although much of that vertical money is then converted into government securities later on, under the current system.
But then, I have already explained that monetary sovereign government debt securities are better seen as a form of (vertical) money than as a form of debt.
So if you see Ellis Winningham, or me, saying that essentially only the monetary sovereign government can create new money, and you see other people saying that most money is created by the private banks, guess what?
Both statements are right – the first one is about ‘vertical money’ and the second is about ‘horizontal money’.
It is all about context.
5) ‘Fiscal Policy Is outlined in the Government Budget’ versus ‘the word ‘budget’ should not be used in the context of a monetary sovereign’.
Another hard one, this. Bill Mitchell prefers to refer to the Government Fiscal Statement these days, rather than use the word ‘budget’ because the word ‘budget’ makes people think of households, who have to balance their budgets over time, which is of course a misleading and pernicious metaphor.
Bill is right – of course, he is. He is my intellectual inspiration, If you ever see me disagreeing with Bill, at least where economics is concerned, I virtually guarantee I will be wrong. I have learned this from past experience.
There again, people are very used to the word ‘budget’ in the context of fiscal statements, and governments themselves use the term. Moreover, which we MMT-ists understand that ‘budgets’ for most governments will be in deficit most of the time, we still understand that items of government expenditure, including the job guarantee, must be carefully planned and ‘budgeted’ for, as they involve significant real resources. Bill himself has in the past published ‘fantasy budgets’, as in his fiscal plan if he was in government on ‘budget day’.
As long as you explain why you are avoiding the word ‘budget’, if that is wat you choose to do, and as long as you explain that monetary sovereign government budgets do not ever have to be balanced , if you choose to use the term ‘budgets’ in this context, it is fine.
Once more, it is a matter of personal taste, and I am no wise enough to know for sure which use of language is more effective. But you feel you are wiser than me, then at least be kind to those you disagree with, and don’t assume they have not given this issue a lot of thought already.
At least, don’t assume they have never thought about this issue.
6) That word ‘deficit’.
‘Deficit’ implies a shortage, or that something is lacking. You might have thought this was an easy issue to deal with. Surely, you may argue, we can eliminate the word ‘deficit’ from our MMT vocabulary.
But you might be wrong.
Bill Mitchell avoids the word ‘budget’ these days, for the very good reason I mentioned above, but still talks about ‘fiscal deficits’.
I keep seeing people questioning the use of this word in MMT, and arguing we should refer to a ‘fiscal injection’, or ‘government net spending’, or ‘a non-government surplus’, instead.
Well, sure. I agree. But……
In Godley’s sectoral balances model, which is at the heart of MMT, and the stock-flow consistent macroeconomic models developed from it, for every financial surplus, there must be a deficit. So, yes, the ‘non-government surplus’ is equal to the ‘government deficit’, but they are not the same concept. It may be that ‘deficit spending’ by the government can best be described as causing the ‘non-government surplus’. Sometimes, desired private sector savings will drive up the non-government surplus, and this will have been facilitated by the government’s willingness to run a fiscal deficit, to support the economy while the private sector net saves.
You see what I mean, I hope. Once more, it is all about context, and the argument you are trying to pursue.
With some audiences, you might like to steer them away from the use of the word ‘deficit’ I the context of net spending by a monetary sovereign government, for the reasons I have stated.
But there will be occasions when the term ‘deficit’ is almost indispensable.
It is, at least, a question of judgement, and to an extent even a matter of taste.
All I would ask of everyone is that they not get frustrated or disappointed when another modern monetary theorist uses different terminology, and especially when they use words of which you disapprove. Give them the credit for having thought through the language they are using, and try to understand why they have chosen a particular frame for their exposition of modern monetary theory to their target audience.
https://www.facebook.com/groups/mmt75/permalink/1530876316946716/
