AFJM Coffeehouse Study Stack
Building Bridges: Can MMT and Just Money be friends?
with Virginia Hammon
Content: Link to Recording / Introduction / About the Speaker / Highlights / The Study Stack
LINK TO RECORDING
Can MMT and Just Money be friends? with Virginia Hammon - October 2021
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Virginia Hammon is a member of the Alliance For Just Money (AFJM) who seeks to link with like-minded groups, learn from them, and have them join us to reform the monetary system for the benefit of all. In this monetary reform coffeehouse (MRCH) presentation, Virginia explores what she has learned about Modern Monetary Theory (MMT) and whether there are ways AFJM can collaborate with MMT to achieve the goals we share. She titled her presentation "The 'Power of the Purse' and Policy: A Housewife's Dilemma" and tries to answer in it: "Is MMT a solution, a step in the right direction, or a swizzle?"
ABOUT THE SPEAKER
Virginia Hammon is a founding member and leader in AFJM. She has served on the Board, as Treasurer, and on various committees. Virginia is extremely knowledgeable about our monetary system. She wrote and published US Money (2018) and co-authored How We Pay for a Better World (2019). Virginia is a retired Montessori educator and school director, and an avid quilter.
Some Highlights of the Presentation
- After noting AFJM's theme of "building bridges" for its MRCHs in year 4, Virginia stressed the importance of humility, "listening to learn," and avoiding arrogance in our efforts to build bridges to and for others.
- Virginia compared MMT and Just Money, identifying commonalities, our fundamental difference, and differences in some of our definitions and theoretical frames.
- In terms of areas of agreement, Virginia suggests (2:00-8:00) MMT and Just Money
- are concerned about many of the same problems,
- share the goal of a better world in which people and planet take priority over profits,
- critique mainstream economics' teaching on money and banking,
- endorse many of the same policies including full employment, sustainable production, regenerative agriculture, renewable energy, and public funding for infrastructure, health, education, and other public goods, and
- agree that 1) we need to take radical action now to correct flaws in our money and finance systems, 2) the relationship of a sovereign government to money is fundamentally different than the relationship of a household or business to money, 3) austerity need not be how a sovereign government balances its budget, 4) money should be a convenient means of exchange, 5) we can inject new money into circulation to mobilize idle resources sustainably for the public good, and 6) inflation need not be a problem as long as we keep our money supply in sync with our productive capacity.
- Virginia said the fundamental difference is that MMT is a way to view and justify public spending within the current money system; Just Money is about changing the money system to create a better world.
- She said MMT has a different position on the nature of money, defining it as debt. This is consistent with the Bank of England's paper, ‘Money creation in the modern economy’, which says the vast majority of money today is created as loans by private banks. Just Money agrees that money is currently created as debt but believes money can and should be created and accounted for as a public asset instead.
- MMT and Just Money also disagree on the roles of ‘federal’ deficit spending and taxation (17:00-25:00).
- MMT asserts the federal government increases the money supply through deficit spending. Just Money argues, using the law and federal financial statements to make the case, that the government borrows by issuing Treasury bonds whenever it spends more than it has in revenue.
- MMT says the government confiscates and destroys purchasing power when it taxes, thereby shrinking the money supply, and then authorizes the necessary spending, which increases the money supply. According to Just Money, taxes are collected and put into government accounts and spent back into the economy according to Congressional appropriations.
- Virginia argues this is not a matter of semantics. There is a real difference between public debt-free money that privileges no one versus using interest-bearing credit as our money, and Just Money wants all our money to be the former.
- MMT may agree the central bank should issue money to the federal government debt-free and not privilege anyone, but MMT still accepts and protects private banks' privilege to create money as private-interest-bearing credit. Just Money wants to eliminate bank created money all together. To signify the difference, Virginia encourages AFJM to use the term Just Money more than sovereign money, arguing sovereign money is also used by MMT and reflects a dominator world view, whereas Just Money suggests a partnership worldview.
- MMT and Just Money also disagree on the ownership of the Fed, MMT arguing it's public, Just Money arguing it's private but should be wholly public. Virginia explains the rationale of each and makes a compelling case (23:00) that Just Money is more correct on this.
- She also suggests the two groups have a somewhat different narrative on the origin of the innovation of money, and significantly different theoretical frames on the logic and accounting of modern money, which Virginia suggests MMT views as a 2-dimensional zero-sum game and Just Money views as a 3-dimensional, complex circulatory system (28:00-40:00). It is here that MMT's unspoken support for the existing power relations becomes clear, as it leaves in place systemic interest payments and privately gained seigniorage that transfers wealth unfairly to private money creators and their shareholders, exploiting people, planet, and posterity in the process.
- Virginia subtitled her presentation "A Housewife's Dilemma" as a loose metaphor for her message that the power of the purse is not, as MMT wants people to think, sufficient for a sovereign government. A sovereign people also, and first, need a government with the sole power not only to determine the currency of their realm but also to issue all the means of payment- coin, paper, and digital- denominated in it. She concludes (41:00) with the features of a desirable money system, and then assesses how well MMT and Just Money measure up. Though she evinces how MMT falls short and exacerbates the growth imperative built into our current system, she commends MMT for shifting thinking and broadening dialogue on money and for encouraging people to envision a better world as a practical option. But, in the final analysis, MMT leads to an uglier world and Just Money to a more beautiful one because "it privileges no one. It's free of debt. It is simple, clear, and honest." And "that's beautiful."
Some Highlights of the Discussion
- We need to build bridges with other movements to create relationships and collaborate on systemic change.
- This presentation will be very helpful for newcomers to the money question and to the views of MMT and Just Money on the current system and its reform.
- Whoever has the power of creating money, has the privilege of choosing where the money goes first.
- Michael Hudson believes the Chicago Plan should be a part of MMT.
- Some MMTers have seen Jeff Eder’s Transitioning to a Sovereign Money System video and were very supportive of his proposal on Progressive Money Canada.
- During the Depression, a fair number of banks supported the Chicago Plan.
- Though some followers of MMT may be misled, we have to ensure all concerned people are well informed of the current system and what Just Money advocates.
- The debt money system means to expand the money supply we have to expand the debt. Just Money fixes that problem. The first chair of the Fed, Marriner Eccles stated, “In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
- We need to be respectful and diplomatic when interacting with members of other monetary movements like MMT.
- It matters that we ferret out, especially post-2007-08 and now in the pandemic, whether all newly issued Treasury bonds are purchased with already existing money or if commercial banks, or the Fed, are now purchasing them with money they created via keystroke for that purpose.
- Whether all advocates of Just Money agree that "on a deep philosophical level" all money is a debt-credit relation, as Virginia posited, is questionable.
THE STUDY STACK
Sources mentioned by Virginia Hammon
Eisler, Riane T. 1987. The Chalice and the Blade: Our History, Our Future. Cambridge, MA: Harper & Row.
Eisler, Riane T. 2007. The Real Wealth of Nations: Creating a Caring Economics. San Francisco, CA: Berrett-Koehler.
Kelton, Stephanie. 2020. The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. New York, NY: Public Affairs, Hatchette Book Group.
League of Women Voters Athens Chapter Monetary Study Committee. 2021. A Proposal for a LWVUS Position Statement for a Money System that Serves League Values.
Phillips, Ronnie J. 1992a. “The ‘Chicago Plan’ and New Deal Banking Reform”. The Jerome Levy Economics Institute, Working Paper No. 76, June 1992.
Simons, Henry. 1948. Economics Policy For A Free Society. Archive.org.
[On page 16 he refers to the “state monopoly of currency issue.”]
US Code Chapter 31 – Public Debt (3101-3104)
Caveat: The views and opinions expressed in AFJM Coffeehouses are those of the presenters and participants and do not necessarily reflect the official policy or position of the Alliance For Just Money.