That Modern Monetary Theory doesn't seem to work so well

These past few years have been an interesting test of Modern Monetary Theory. Don’t worry about the balance between tax and government spending. After all, the actual real spending is financed by simply printing money anyway, tax is that balancing item that comes later. So, why bother with the pretence, just keep printing and spending as much as pleasures politicians’ hearts to fill societal need.

UK households face biggest fall in living standards since 1950s, say experts

Ah, that doesn’t work out so well then.

There being those three reasons why it doesn’t work. One is that the quantity of money does in fact matter. Inflation will come and bite upon the fundament.

The second is that more government spending is not just more money floating around. It’s more direction of more of life by those who are good at kissing babies. Being able to get elected is not, surprise though this may be to some, actually a good qualification for knowing how society should work in any detail. That’s knowledge that resides in us, the populace, not elected representatives. Shifting the power and the chequebook over to those with even less knowledge is not a good strategy.

The final - and to us proof positive - one is that spending other peoples’ money is glorious fun, taking it one of those tricky little things that there’s always a certain hesitancy over. Politicians like to be liked - the kissing babies thing - and they just never will tax to cover their spending desires. That we’ve a national debt at all proves both two and three on our little list. If all government spending were more productive than private such then there would have been the burst of growth from that past spending to pay off the debt which would no longer exist. Also, they’ve not raised taxes in the past in order to finance that spending, have they?

Or, as we might put it, allowing politicians a free hand with a never-empty societal chequebook is about as useful as providing alcoholics with a free bar. Some will eventually learn self-restraint, undoubtedly, but not many and not soon.