More MMT Flaws through the Lens of Stützel

Johannes Schmidt has a new paper on the flaws of MMT’s treatment of open economies. Schmidt uses Wolfgang Stützel’s Theory of Exchange Rates, which led him to favor a fixed exchange rate system, to provide a more sensible Alternative. Find and download this paper here: ‘The Open Flank of MMT’ – contribution to the 25th FFM Conference 2022 on “Post-Keynesian Economics and Global Chal-
lenges”, Berlin, October 20-22, 2022

In a previous paper, Schmidt has outlined Stützel’s role in the german council of economic experts in 1967, where he – against the majority position within the council at the time – argued in favor of keeping and adjusting the fixed exchange rate system established at the 1944 Bretton Woods conference. His minority position did not get much attention at the time as his arguments were simple but unconventional and innovative compared to the approaches discussed at the time. Stützel left the council over the quarrels. You can download Schmidt’s documentary paper here: “Fixed or flexible exchange rates – Wolfgang Stützel vs. the German Council of Economic Experts”. Contribution to the 26th FFM conference, Berlin, October 28-30, 2021.

However, the path suggested by Stützel was eventually chosen by Europe after the breakdown of the Bretton Woods System in the early 70s, which was followed by extensive currency turbulences between european currencies (i.e. French Franc, Deutsche Mark, italian Lira etc.). Subsequently, Europe established the European Monetary System in 1979, which 20 years later led to the fully fixed, non adjustable exchange rate system of the Euro within the Eurozone countries established in 1999.