The trouble with Neochartalism (and called “Modern Monetary Theory” by the Neochartalists) is that what is correct is not original and what is original is not correct.
A popular heterodox blogger writing under the pen name “Lord Keynes” and blogging at Social Democracy For The 21st Century has written a post Limits Of MMT.
It’s good to see the blogger point that the main trouble with Neochartalism is the balance of payments constraint. He/she has said this in the past in posts while promoting it, so it’s good to see a special post for this. I don’t agree with many things with “Lord Keynes” but given the blog’s popularity, I think it’s a good thing to have happened.
There is one thing I would have liked to see differently. It is sometimes said that Neochartalism works for advanced/rich nations and not for poor nations. But this gives too much importance to Neochartalism. This is because the rise and fall of nations itself depends on competitiveness in international markets. Saying “MMT works for advanced nations” makes it look as if the success and failure of nations is to be explained elsewhere. It’s still true of course that advanced nations can expand domestic demand by fiscal expansion but they also have to look after the being being of firms selling products in international markets, to stay competitive and not lose edge. Similarly as the blogger Lord Keynes says, “What is needed for much of the Third World is heterodox development economics, not MMT.”
More generally a concerted action is needed by world political leaders in which fiscal policies are coordinated with a set of consistent balance of payments targets.
Neochartalism has confused people more than they were confused earlier. It has to be debunked.