I finally read Palley’s “What's wrong with Modern Money Theory”

It’s pretty much a summary of almost all the non-stupid critiques of MMT. It has no new information, rather it should be viewed as a survey. https://www.elgaronline.com/view/journals/roke/8-4/roke.2020.04.02.xml

I’ll probably work a reference to it into my MMT critique chapter. Since it’s a grab bag of critiques that are being thrown against the wall, I covered them individually in separate sections.

I’m obviously not hugely impressed with the arguments.

For example, he spends a lot of time explaining how MMTers did not invent fiscal policy. However, since they aren’t claiming that they did (at least in any article I have read), that is just Palley thrashing a straw man.

Worrying about the exchange rate came as expected. Given that exchange rates don’t usually collapse in the absence of high domestic inflation or foreign currency borrowing, this is just a whining that MMTers aren’t using PKers precious external constraint models.

Complaining about rising interest rates when the policy rates are locked at zero just demonstrates that Palley is utterly incapable of understanding fixed income pricing.

In any event, if people want a critique that isn’t based on making stuff up, there it is.

As a final clarification, the critique is flawed because it relies on Palley’s terrible Old Keynesian models. So you need to replace Palley’s analysis with real macroeconomics, and focus on the underlying message. (Fixed typo in earlier tweet.)

Link to slightly longer comments. (I should have put earlier tweet in this thread...)

http://www.bondeconomics.com/2020/10/comments-on-palleys-mmt-critique.html