What’s good about MMT
MMT is just a repetition of chartalism (the original description of what Graeber calls "temple money"), and its good contribution to policy debates is the reminder that "seignorage" is an under-appreciated source of funding for government purchases.
But the common argument by MMT supporters that "seignorage" can entirely replace bond issuance and thus save interest costs is futile because:
Governments issue bonds rather than banknotes because bonds are less "liquid", that is buyers of bonds tend to hoard them rather than use them, as they do for currency, which is just zero-interest perpetual bonds.
Governments issue bonds rather than banknotes to create or rewards a constituency, the investors in those bonds, to vest them in the continuing existence and solvency of that government; a consistuency the more vested if there is an appreciable interest stream attached. For example A Hamilton in the 18th century pushed to federalize the war debts of the member states in order to give bond holders a stake in the continuing existence of the federal government.
When the political reason to issue bonds rather than currency don't exist, governments in the past have been rarely shy to issue currency to gain funding via "seignorage" for their purchases.
As to the motivation to control liquidity via open market operations, this has seemingly become less powerful: government bonds, even long dated ones, can be readily used a collateral for loans of liquid currency, so they are in effect entirely liquid themselves. But this only in current conditions: because the currency of the loan for which a bond can be posted as collateral is also issued by the government.
So if the government issues $1b of 10 year bonds and at the same time issues £1b of currency for a loan "discounting" bonds the net effect is nearly as if it had issued $1b of currency outright, except that:
For political reasons the bond interest rate provides revenue to constituencies favoured by the government, e.g. to recapitalize failed banks. MMT supporters may consider this needless payment of interest a waste, but economic policy is not as simple as that.
The loan of currency against the $1b collateral can have a shorter maturity than the collateral bond, this allows for withdrawing liquidity by failing to renew the collateralized loan. Clearly not a concern in the early decades of the 21th century though.
