[caz25]

I would like to push back on two points based on my understanding of MMT1."In fact of course it assumes that the real economy – where wealth and value are actually produced – is already operating, so what the government would be doing is buying some of the goods and services produced there. It also assumes that the government has already been financed from taxation or borrowing."MMT recognizes that neither taxes nor borrowing are the financing methods of government. This is a technical impossibility, at least in the US, where the Treasury includes money that is in the hands of the private sector amongst its liabilites on its balance sheet. A nice paper on that point can be found here http://www.levyinstitute.org/pubs/wp244.pdf. Money is a debt of the government and not an asset that they have to claim back from the private sector, like hoarding gold. In fact, taxes, rather than financing the government, are primarily used as a means of enforcing a currency unit of account among the population, since everyone must use the government money to settle their liabilities, aka taxes, with the government. The government is self-financing, which is mainly a function of it having the power in a society. Your previous paragraph explains more of how you arrived at the sentence above. "The way it is supposed to work is that the government introduces money into the economy through the wages and salaries of its employees, state pensions and other benefits, and what it pays its contractors; these then spend it, stimulating the growth in the rest of the economy, out of which the government eventually recoups most of the money via taxes"No money needs to be recouped, in the sense in which you seek to recoup an asset which has value to you. The money has no value to the government. Much of this seems clearer to me after reading more MMT literature on the history of money and the technical details of how the government uses money in its balance sheet. 2."The only way out is for profitability to be restored. The government can help this to some extent by cutting taxes on profits but this means that, with less income from taxation, it has to cut rather than increase its spending. Other factors such as the clearance of stocks, bankruptcies, capital depreciation, lowered interest rates, and reduced real wages will be more important. These are what will restore profitability and eventually re-stimulate the economy and move it on to the next-stage of its regular boom/slump cycle."You mention in the above paragraphs that one of MMT's points is that government spending is not constrained by financial assets, only real production capacity. Why then would fewer tax revenues lead to less government spending? This strikes me as austerity logic and is squarely against what MMT advocates. As long as the government is the issuer of its currency, which is not the case of countries under the Euro, private sector profits are not a contraint on government spending. The government is in no way financed by taxes or borrowing. Again, I refer you to the paper I cited above.

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