MMT Founders Mosler and Wray: ‘Monetary Policy has it Backwards’

MMT Founders Mosler and Wray believe that 'Monetary Policy has it Backwards'

MMT founders Mosler and Wray believe Central Banks have been acting exactly backwards (wrong) for decades in their attempt to achieve their inflation target.

This seems to be a consequence of the fact that MMT’s look at the financial system largely abstracts from the maturity structure of debt, differing degrees of liquidity of financial assets, and the difference between face value (amount due at maturity) and current market price of financial assets – standard distinctions any bank or financial traders must make and routinely makes.
Quite unsurprisingly, on that basis they cannot clearly understand what financial institutions (including central banks) empirically do, and have to base their vague ‘backwards’ claims on their interpretation of mere correlations, rather than modelling how interest rate policy translates to the price level through changing expectations, plans & actions of banks, fin. markets, and nonfinancial firms.

A pretty basic point, which Paul Davidson has also noticed in his note on MMT in Real World Economics Review issue No. 89 (Oct. 2019), entirely dedicated to MMT and criticisms of MMT: