Article: Sukudev from Sei Lanka
MMJ 20220405
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From Sukudhew, former BNM Dy Governor Post in Linkedin 19-4-22 - Sri Lanka
Sri Lanka reached its current dire straits due to many causes. The top among these causes is giving ruling power to a corrupt and clueless cabal of leaders that did not care much for the welfare of anyone other than themselves and their families. These politicians, their extensive families, and even more extensive parasitic cronies, have their sticky fingers in practically all parts of economic activity in Sri Lanka. This hurt Sri Lanka's economic productivity and competitiveness.
The final nail in the coffin was the decision to issue huge amounts of government debt funded by large scale money printing by the central bank. Sri Lanka decided to adopt Modern Monetary Theory (MMT) and the results are definitely not a redemption of the theory – inflation increased sharply while the currency depreciated precipitously. The free lunch promised by MMT has once again proved to be a mirage.
When clueless politicians (and equally clueless central bankers) have run the economy into the ground, they will likely resort to large-scale money printing. After all, it allows them to temporarily hide their failures and creates false prosperity, and they themselves do not suffer the consequences since much of their wealth is already stashed in the developed countries. It is the ordinary citizen that bears most of the burden of their foolish policies.
For citizens of other developing countries, here again is another warning of what can happen when you put incompetent and corrupt politicians and policymakers in charge of running the country. If you prefer to hide your head in the sand and think that all will be well, don't be surprised if one day you find yourself unable to buy basic necessities for your family. And if you ever hear the central bank talk about MMT or any such large-scale money printing schemes, you know that day cannot be too far off.
I have been to Sri Lanka and love the country and its people. It saddens me greatly that it has reached such dire circumstances and that the road ahead will entail so much suffering for its people.
MMJ 's RESPONSE
This comment is only half correct. The corrupt leaders part yes, but there is nothing wrong with govt created money to fund real sector projects. (Done in the MMJ manner of course). The key point here is viable real sector projects. Not a big airport in the President's kampung or a second unnecessary sea port which probably benefits the President more than the nation. So it is not the "money creation by govt for real sector project" that is wrong - what is wrong is the wrong choice of real sector projects.
These choice of Sri Lankan govt funded real sector projects stinks from a distance away. So it is wrong for the writer to blame govt money creation when it is the choice of projects which is the problem. It's a mistaken conclusion. We cannot be enamoured with the current money creation system when our appointed money creators, the banks selfishly create 80% of money to maximise their profits while also maximising the suffering for the people.
Yes that is how we were taught at universities for yorns and yorns, and how we made wrong policy decision yorns and yorns, based on clearly wrong understanding of the role of banks in the economy. Just because that is how we learnt things does not mean it must be right. A wrong is a wrong- we must be brave and be big enough to change our thoughts.
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Dikemaskini [Updated]: Sam Ahmad 20230627