DOGE is best characterized as an NGO. It is not intended to be an official department, which by all measures simply replicate the MBO. Do you want to look at the cast of characters that are signing up for positions in that organization. They consist of what is now named broligarchy. Their philosophical foundation, is the one proselytized by James McGill Buchanan which makes Ayn Rand look like a hippie.
Their fundamental view of human nature is that we are all venal selfish entities. There is no altruism. There is no common weal, no social instinct, just sociopathy. They also believe in the most extreme right wing libertarian views that government, of course populated by people who only intend to gain mastery over others in the world and then enslave them, must end. They believe that the wealthy enjoy the natural right to subjugate anyone else in the world.
They are increasingly open about this purpose, open about their views of themselves and open that they intend to destroy the US economy and the dollar with it and replace it with bitcoin which they control. Now I’m not a big fan of dollar dominance and I’m fully aware of the advantages it grants the United States, but the implications of destroying the dollar and everyone’s financial security that depends on it are terrifying.
These are people who have long desired and planned to take over the world, or at a minimum to smash apart the representative components of the federal government, leaving behind a totalitarian surveillance police structure defending thre right to engage in any behavior they choose. They don’t like people that aren’t as wealthy as they are. They don’t really like many of their peers. Imagine something like 19th Europe ruled by various aristocracy, except with far fewer civilized sentiments.
Notice Bernie is on board with DOGE's campaign against wasteful spending by the DoD. That's ultimately what this is about, DOGE is a weapon for goring oxes. It puts everybody on the defensive which I imagine is just how Trump wants it.
Anyways look forward to seeing how Bernie reacts when this weapon is aimed at spending he supports.
Its all about the monetary paradigm. MMT is an excellent insight and palliative reform, but why settle for a palliative when a genuine paradigm change based on the history of conceptual changes is possible???
The democrats don't recognize the power of a paradigm change probably because they fear the head of the oligarchy, namely Finance, but also out of lack of understanding what paradigms actually are. The republicans DO understand power, but they're captured by Finance and the rest of the oligarchy as well.
But what if a new monetary paradigm of Gifting is the thing that Marx's "rebellion of the bourgeisie" never cognited on and so never accomplished? Mathematically doubling the demand for every actually productive enterprise's goods and services with a 50% Discount/Rebate at retail sale, a universal dividend at age 18 for life and a 50% Gift of interest/Debt Jubilee to the borrower at point of loan signing has to:
1) make every business from the Mom and Pop to Wal Mart stand up and cheer,
2) immediately enable a mass socio-economic and political movement of every citizen whose purchasing power has just been doubled and resolved their biggest bitch by transforming chronic inflation into beneficial price and asset deflation and
3) even the banks would have problems refusing the proposition that they get 50% of the interest on a 30 yr. mortgage up front as revenue/profit they could stick directly into their pockets.
Paradigm changes are ENTIRE PATTERN changes that resolve the anomalous present paradigm by applications that completely invert temporal universe reality. Once you realize that, suggesting palliative reforms instead is actually exposed as a cowardly and unethical act.
yes. terrifying. i will point out that the R's are in the process of appointing a committee to study in private how to destroy SocialSecurity. Then they will have an up or down vote on the committee's proposal...with no fingerprints. apparently they think there will be enough government left after they are done to think elections matter. of course they promise not to affect my SS, but they think I won't mind if they destroy it for my children.
i have actually studied how SS works, my reults confirmed by SSA Actuaries, and American Academy of Actuaries. In fifteen years of watching Congress and listening to the pundits I have never heard anyone say anything honest about SS.
what is true is that SS has nothing to do with the Federal Budget deficit...it is paid for by the workers who will get the benefits. It is a "tax" for the same reason speed limits and red lights are "the law. but it acts more like a savings account and very good insurance plan.
also true: the Twenty Trillion or so "Unfunded Deficit!" in Social Security's own finances can be closed entirely and forever by just raising the payroll tax one tenth of one percent per year while real wages are going up over one full percent per year....in order to pay for your own life expectancy after you can no longer work: a longer life expectancy does not mean you will be able to work, or find a job. Nor should you have to: if you have paid the actuarial cost of your own retirement no one should be able to say you can't retire.
This is something you CAN do something about....if enough of us tell our Congress, in ways they can't pretend not to hear, that we know SS does not cause the Debt and that we are willing to pay the extra one dollar per week per year to keep it for ourselves and our children.
Your assertions are fundamentally flawed. First, the idea that we can “just print more money” to cover the interest on our debt, let alone fund all federal obligations, is both impractical and legally constrained. The debt ceiling exists to limit how much the government can borrow, and printing money indiscriminately to bypass this would violate longstanding fiscal policies and laws.
Even if we chose to raise or eliminate the debt ceiling to avoid default, printing excessive money would be far from a solution. Do you genuinely believe flooding the market with printed dollars resolves the issue? If so, you’re ignoring critical economic consequences and demonstrating a lack of understanding of global finance.
Let’s break it down:
1. Credibility and Confidence: Printing excessive money undermines trust in U.S. financial stability, which could increase borrowing costs and potentially jeopardize the dollar’s status as the world’s reserve currency. Without this status, the U.S. would face significantly higher costs to borrow and trade globally.
2. Inflation: A massive influx of printed money into the economy would devalue the dollar, sparking inflation or even hyperinflation. This diminishes purchasing power and hurts American consumers, especially those in lower-income brackets.
3. Spending vs. Debt: While debt itself isn’t inherently bad—it allows for investment and growth—the problem lies in unchecked government spending. Addressing runaway spending is far more critical than printing money or accruing more debt without a clear plan to manage it.
In conclusion, reducing spending, not just accumulating debt, is the real issue. Suggesting that we can ignore these risks or casually print our way out of trouble shows a lack of seriousness about the complexities of modern economic systems.
Sorry cuz, but your understanding of MMT is “fundamentally flawed” - have you even heard of economists like Dr. Michael Hudson, Warren Mosler, Steve Keen, William Black, Randall Wray - the writings and research undertaken at UofMO (KC) where Prof Kelton was the Economics Dept. chair? Have you ever read the Naked Capitalism blog or those posted by some of the aforementioned? Methinks not….
unfortunately i have read naked capitalism. they struck me as a cult of lunatics, insisting that I adopt the meanings they imposed on words like "tax" or have mu comments deleted. in any case "have you read..." is not an argument. it amounts to a statement the "hey, I believed this and you will too," which in my experience has never been true.
I'm not holding my breath unfortunately. They seem determined to implement dangerous austerity measures for the working poor while doing their usual trickle-down nonsense for the very rich. Bottom line, its flat out astounding to see how ignorant people are when it comes to understanding the monetary system.
For me, perhaps the most surprising insight offered by MMT is the simple but profound proposition that U.S dollars have to come from somewhere! As I understand it, dollars are created in 2 ways: 1) the federal gov't deficit spends them into existence each year with its annual budget and 2) banks create dollars when they issue loans (which is why serious bank regulation is so important).
Question is, how do we acquire dollars that we own free and clear in our savings accounts? In can't be "bank money" because all bank loans exist simultaneously as assets and liabilities that sum to zero. And banks like their loans to be repaid in full, plus interest. So that leaves the federal gov't's deficit spending as the only logical source of our saved dollars. Unlike banks, the gov't really doesn't care if it claws back in taxes less than the amount it spends each year.
None of us has a "Benjamin Tree" growing in our backyard. So the next time you hear someone complain about the so-called "national debt" (it's really more accurate to call it a "float in perpetuity"), remind them that they have the "national debt" to thank for their financial wealth.
it is too hard to tell in such a short comment, but i think you are likely right about this. the problem for mmt that i have seen is that the decisions about spending will be made by the same people who are making them now. there is nothing new about "printing" money, and it's hard to see how mmt would control it. mmt would replace lying about the debt with taxing the rich to control inflation...at least that's my take. i'd be glad to stop the lying about inflation, but i think taxing the rich has political limitations we can't solve, and encouraging people to believe in free money is not good for them. but, yes of course "deficit spending" is the way countries and banks increase wealth...but not without limit.
meanwhile i know essentially nothing about managing interest rates. but i did read a book by Bernacke and he seems to think it is an essential tool in limiting inflation on the one hand and recession on the other.
Thanks for the feedback. Two thoughts. Deficit spending is not "free money." The idea is that if resources and labor are available, why not put them to work? So, for example, if the gov't deficit spends $100 million to build a new bridge and you get paid as a construction worker on that project, you didn't get "free money." You EARNED it!
And the truth is that taxing the rich will do next to nothing to curb inflation, because the rich have a "high propensity to save." In other words, they've already bought all the toilet paper and toothpaste they need, so any extra income goes into savings. And a dollar saved is a dollar that's not chasing scarce goods and services and driving up their prices. The reason to tax the wealthy is to reduce their (currently absurd) political power and to reduce income inequality, which just psychologically depresses millions of Americans.
Oh, one more thought. You mention Bernanke. The Fed sets interest rates, not some imaginary "bond market." The idea that the gov't has to "borrow" its own money is just absurd. The Fed/Treasury should stop selling bonds altogether and make bond traders go out and find a real job. Just let banks pay "Interest on Reserves" at whatever rate protects savings from inflation and stop worrying about it.
maybe some clarification: i did not say deficit spending was free money. i even agree with mmt that just printing money to pay for real work that would otherwise not get done,,is not free money. but the meters I have run into have seemed to me to be intoxicated by the idea of free money however they justify it "in theory." otherwise, the general public who so far have not heard of mmt would soon learn to think of it as free money. i get people responding to my efforts to explain SS to them saying why not just print the money?
i agree with you about taxing the rich..i think it was Kelton who explained the way to deal with inflation from printing too much money would be to tax the rich. if she reads this she can explain what she meant. meanwhile "tax the rich" is the main big idea that the Left has for solving the SS "crisis"...when just taxing workers and extra one tenth of one percent per year would end the crises completely and forever [ someone from "SSWorks was claiming taxing the rich would completely solve the problem..but no proposal for taxing the rich so frar either closes the present "actuarial deficit" over the near term or avoids it returning in a few years.
i don't like "income inequality." i like "income sufficiency" i see no value in envying the rich. neither do i see any value in making the poor miserable from inadequate wages. i do fear the power of too much money in the hands of the very rich. but those people already have the power to keep you from raising their taxes...and threatening to raise their taxes will only make them work harder to first not elect "liberals" and second "destroy social security."
i don't know enough about the bond market to question your assertion about the Fed "setting" rates. i know they do... but i wonder if they could if the market demand for money supported higher rates than the Fed wants, or was so low that even zero rates could not stimulate the economy.
The whole "free money" issue is 99% old fogeyism and 1% inadequate/failure to better acculturate positive and constructive purpose in addition to employment. If having a lot of money was such a hard and fast road to ruin the wealthy would have killed themselves off ages ago. Life itself is set up to be a problem by its apparent reality of Dualism Only of which Trinity/Unity/Oneness/Process AKA the integrative mental discipline of Wisdom is the answer.
Right off hand I can't think of a better incentive to become gainfully employed than your first day on the job you get a 100% increase in your purchasing power with a 50% Discount/Rebate policy at retail sale. Then just craft additional policy that mitigates overconsumption like a sliding scale percentage of required "tax"/Gift of Gifted money into eco/energy and infrastructure bonds at a 5-6% rate. You could also require that one average at least part time employment for the first 5 years of receiving a $1000/mo. universal dividend or have it reduced by half, and then have it made whole by 2 years of part time employment.
Things like that. Monetary Gifting strategically implemented with 50% Discount/Rebate at retail sale and a universal dividend immediately resolves the deepest problems of modern economies and opens up additional benefits like being able to eliminate payroll taxes for welfare and unemployment insurance and lowering income taxes across the board because having resolved inflation at retail sale we could cognite on the fact that a monetarily sovereign nation doesn't really have to tax at all except to enforce compliance by economic agents and prevent/effectively blunt the power of oligarchy from dominating the society.
in the first place the payroll tax is not "welfare" it is you saving your own money for your needs after you can no longer work. it has to be a "tax" because too many people think they are too smart to need it... like they are too good drivers to need speed limits and stop signs. in return they get the best insurance for their savings that anyone can get in a capitalist society.
other than that your essay is so sky-high abstract it is meaningless...no insult intended, just an observation about "abstraction."
and, finally, "you could also require..." should ring alarm bells.
the "free money" issue has nothing to do with "having too much money." it is a real phenomenon visible in the rhetoric of people who think modern monetary theory will enable them to get whatever they want at no cost to themselves. you can see it in public spaces, no need to "visualize it."
You can call it whatever you want the fact remains that the 50% Discount/Rebate at retail sale and universal dividend policies accomplish what payroll taxes do without diminishing an economic agent's purchasing power or revenue, and they also have the advantage of resolving at least three of the economy's supposedly most thorny problems.
There's nothing abstract about a monetary gift.
In order to fully understand life you DO have to think in terms of ideas like duality and trinity, unless you want to simply react to life instead of trying to more deeply/wisely understand it.
Finally, I've said many times here that MMT has the mechanics of money creation correct. That doesn't mean I think it will resolve the money "problem" all by itself. Its an insightful palliative of the problematic monetary paradigm. What we need however is to actually change the monetary paradigm.
Warren Mosler argued over 30 years ago that the Fed doesn't sell bonds to "borrow" money, it does so to remove excess currency from the banking system. If the Fed didn't do this, all banks would be flush with currency and would never have to borrow in the overnight market to settle accounts. This state of affairs (many lenders but no borrowers) would drive the interest rate down to zero (which MMT calls the "natural rate"), which would screw up the Fed's target rate of about 2%.
The problem with the bond market is that the buying and selling of treasuries creates the illusion of the gov't borrowing its own currency, which is absurd on its face.
Leaving this erudite exchange to one side, I predict COPOTUS Musk will try to use the debt ceiling to impound spending he disfavors. But Trump may figure out that too much deficit-howling will get in the way of yet another round of tax cuts.
Doesn't Musk have Aspergers or something? I swear the whole Trump clown car of nominees makes me think Putin does have a video of Trump getting a yellow shower from Russian prostitutes and has told him to create bureaucratic chaos....or else. If he nominates a horse to head the NSA we'll know it for sure.
The Threat to the U.S.A. — Weakened or privatized inherently governmental functions will break down existing layers of internal control checks and balances in order to obtain power and control; and a more direct access to the U.S. Treasury by individual interests.
I was happily able to attend the “Finding the Money” premier in San Rafael last Fall. Since then, I’ve been startled by the number of people in high places who clearly don’t understand the meaning and implications of “national debt” (even at the NYT).
The gist of MMT seems to be that, for countries with sovereign currency, funding for necessary productive activity does not need to be an obstacle. Yet alongside that, another key consideration lies in not inflating the money supply with spending that does not produce real value. Much if not most economic activity these days is designed primarily to churn dollars — i.e. to “make money”, and whatever value created is secondary.
Money is supposed to be a medium for the exchange of value. Yet if one’s goal is to amass ever-increasing amounts of monetary wealth, any actual value offered in exchange is an impediment to that goal. Accordingly, we arrive at a range of perverse scenarios -- speculative investment, rents and interest — where money makes money off of money without creating any actual value. In worst cases (e.g. hedge funds), money increases by actually destroying value.
A Practical Solution
If the core of of the problem centers around hoards of money that increase without limit, the clear solution is to impose some sort of limit. In the current socioeconomic context, a progressive wealth tax such as that proposed by Senators Sanders and Warren would be a step in the right direction. Even a child can understand that the beneficiaries of a particular system ought to pay back in kind, in support of the system that enabled their success.
A More Idealized Solution - Entropic Currency
The problem for most physical forms of wealth is entropy — they tend to deteriorate over time, or are subject to forces that deplete them — like theft or rot or conquest. Today’s form of money however is not a real, physically existent thing. Our “fiat” currency is simply a concept —an idea we all agree to. It can exist in perpetuity, so long as we all continue agree to it. The unfortunate consequence is this enables someone with sociopathic leanings to hoard monetary wealth far beyond any need or reason — with the destabilizing social, psychological, political and environmental consequences we currently grapple with.
But if what if “entropy” were designed into a monetary instrument? That is, what if any issuance of currency gradually lost value over time, and ultimately had an expiration date? That would encourage the use of money for its intended purpose — as a catalyst for commerce, since today’s dollar would be worth less month by month. The more that money circulates, the more it changes hands, the more robust and equitable an economy tends to be.
Such scenarios (“demurrage” or negative interest) were tried in the early part of the last century as a parallel to the national currency during times of economic depression. (Apparently the Swiss WIR Bank is still functioning today, though I don’t know if the format has changed.) (1)
The early forms of demurrage money consisted of physical bill that had to be periodically renewed with the purchase of a stamp (“stamp tax”). Today, physical currency comprises only a tiny fraction of circulating money. However, now that most forms of currency are digital, existing only in electronic ledgers, perhaps each unit of currency could be “stamped”/tagged with an issuance date and an expiration date. For example, a December 2024 dollar might lose value at the rate of 1% per month, rendering it valueless in roughly ten years.
The above might go a long way toward discouraging the long-term hoarding of such dollars, thus eliminating the egregious hoards of monetary wealth that are currently destabilizing civil society, politics, and planet.
In today’s complex economy, it may be difficult to entirely change over to such a monetary system, yet “complementary currencies” such as the aforementioned WIR work in parallel with the national currency. We do generally acknowledge distinct economic domains, as suggested by the memes “Main Street” vs “Wall Street”, so perhaps such a parallel currency system might be explored as better serving the needs of the country at large.
DOGE is best characterized as an NGO. It is not intended to be an official department, which by all measures simply replicate the MBO. Do you want to look at the cast of characters that are signing up for positions in that organization. They consist of what is now named broligarchy. Their philosophical foundation, is the one proselytized by James McGill Buchanan which makes Ayn Rand look like a hippie.
Their fundamental view of human nature is that we are all venal selfish entities. There is no altruism. There is no common weal, no social instinct, just sociopathy. They also believe in the most extreme right wing libertarian views that government, of course populated by people who only intend to gain mastery over others in the world and then enslave them, must end. They believe that the wealthy enjoy the natural right to subjugate anyone else in the world.
They are increasingly open about this purpose, open about their views of themselves and open that they intend to destroy the US economy and the dollar with it and replace it with bitcoin which they control. Now I’m not a big fan of dollar dominance and I’m fully aware of the advantages it grants the United States, but the implications of destroying the dollar and everyone’s financial security that depends on it are terrifying.
These are people who have long desired and planned to take over the world, or at a minimum to smash apart the representative components of the federal government, leaving behind a totalitarian surveillance police structure defending thre right to engage in any behavior they choose. They don’t like people that aren’t as wealthy as they are. They don’t really like many of their peers. Imagine something like 19th Europe ruled by various aristocracy, except with far fewer civilized sentiments.
Thanks for relentlessly shining the light of clarity on this (I.e. true meaning of "national debt").
I'm astounded by how many people in high places apparently don't understand.
Notice Bernie is on board with DOGE's campaign against wasteful spending by the DoD. That's ultimately what this is about, DOGE is a weapon for goring oxes. It puts everybody on the defensive which I imagine is just how Trump wants it.
Anyways look forward to seeing how Bernie reacts when this weapon is aimed at spending he supports.
I suspect Trump at the behest of his cronies has realised the political leverage in scaremongering about "debt mountains" and "deficits".
Its all about the monetary paradigm. MMT is an excellent insight and palliative reform, but why settle for a palliative when a genuine paradigm change based on the history of conceptual changes is possible???
The democrats don't recognize the power of a paradigm change probably because they fear the head of the oligarchy, namely Finance, but also out of lack of understanding what paradigms actually are. The republicans DO understand power, but they're captured by Finance and the rest of the oligarchy as well.
But what if a new monetary paradigm of Gifting is the thing that Marx's "rebellion of the bourgeisie" never cognited on and so never accomplished? Mathematically doubling the demand for every actually productive enterprise's goods and services with a 50% Discount/Rebate at retail sale, a universal dividend at age 18 for life and a 50% Gift of interest/Debt Jubilee to the borrower at point of loan signing has to:
1) make every business from the Mom and Pop to Wal Mart stand up and cheer,
2) immediately enable a mass socio-economic and political movement of every citizen whose purchasing power has just been doubled and resolved their biggest bitch by transforming chronic inflation into beneficial price and asset deflation and
3) even the banks would have problems refusing the proposition that they get 50% of the interest on a 30 yr. mortgage up front as revenue/profit they could stick directly into their pockets.
Paradigm changes are ENTIRE PATTERN changes that resolve the anomalous present paradigm by applications that completely invert temporal universe reality. Once you realize that, suggesting palliative reforms instead is actually exposed as a cowardly and unethical act.
not a very encouraging list of comments.
i would accept the proposition that i am as insane as everyone else if you will accept the proposition that you might be as insane as i am.
ghost,
yes. terrifying. i will point out that the R's are in the process of appointing a committee to study in private how to destroy SocialSecurity. Then they will have an up or down vote on the committee's proposal...with no fingerprints. apparently they think there will be enough government left after they are done to think elections matter. of course they promise not to affect my SS, but they think I won't mind if they destroy it for my children.
i have actually studied how SS works, my reults confirmed by SSA Actuaries, and American Academy of Actuaries. In fifteen years of watching Congress and listening to the pundits I have never heard anyone say anything honest about SS.
what is true is that SS has nothing to do with the Federal Budget deficit...it is paid for by the workers who will get the benefits. It is a "tax" for the same reason speed limits and red lights are "the law. but it acts more like a savings account and very good insurance plan.
also true: the Twenty Trillion or so "Unfunded Deficit!" in Social Security's own finances can be closed entirely and forever by just raising the payroll tax one tenth of one percent per year while real wages are going up over one full percent per year....in order to pay for your own life expectancy after you can no longer work: a longer life expectancy does not mean you will be able to work, or find a job. Nor should you have to: if you have paid the actuarial cost of your own retirement no one should be able to say you can't retire.
This is something you CAN do something about....if enough of us tell our Congress, in ways they can't pretend not to hear, that we know SS does not cause the Debt and that we are willing to pay the extra one dollar per week per year to keep it for ourselves and our children.
this is a repost of a reply to "ghost" below that did not seem to appear.
Your assertions are fundamentally flawed. First, the idea that we can “just print more money” to cover the interest on our debt, let alone fund all federal obligations, is both impractical and legally constrained. The debt ceiling exists to limit how much the government can borrow, and printing money indiscriminately to bypass this would violate longstanding fiscal policies and laws.
Even if we chose to raise or eliminate the debt ceiling to avoid default, printing excessive money would be far from a solution. Do you genuinely believe flooding the market with printed dollars resolves the issue? If so, you’re ignoring critical economic consequences and demonstrating a lack of understanding of global finance.
Let’s break it down:
1. Credibility and Confidence: Printing excessive money undermines trust in U.S. financial stability, which could increase borrowing costs and potentially jeopardize the dollar’s status as the world’s reserve currency. Without this status, the U.S. would face significantly higher costs to borrow and trade globally.
2. Inflation: A massive influx of printed money into the economy would devalue the dollar, sparking inflation or even hyperinflation. This diminishes purchasing power and hurts American consumers, especially those in lower-income brackets.
3. Spending vs. Debt: While debt itself isn’t inherently bad—it allows for investment and growth—the problem lies in unchecked government spending. Addressing runaway spending is far more critical than printing money or accruing more debt without a clear plan to manage it.
In conclusion, reducing spending, not just accumulating debt, is the real issue. Suggesting that we can ignore these risks or casually print our way out of trouble shows a lack of seriousness about the complexities of modern economic systems.
Sorry cuz, but your understanding of MMT is “fundamentally flawed” - have you even heard of economists like Dr. Michael Hudson, Warren Mosler, Steve Keen, William Black, Randall Wray - the writings and research undertaken at UofMO (KC) where Prof Kelton was the Economics Dept. chair? Have you ever read the Naked Capitalism blog or those posted by some of the aforementioned? Methinks not….
unfortunately i have read naked capitalism. they struck me as a cult of lunatics, insisting that I adopt the meanings they imposed on words like "tax" or have mu comments deleted. in any case "have you read..." is not an argument. it amounts to a statement the "hey, I believed this and you will too," which in my experience has never been true.
No offense, but thats all of the delusions of neo-classical orthodoxies wrapped up into one post. Do yourself a favor and take Cousin's advice and read Hudson etc. and you'll have a good idea of the systemic problems. Then read my book https://www.amazon.com/Wisdomics-Gracenomics-New-Monetary-Paradigm-Policies/dp/B08X7MZ4KH/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=1552358772&sr=1-1-catcorr and then you'll have the specific idea that applied will resolve those problems.
I'm not holding my breath unfortunately. They seem determined to implement dangerous austerity measures for the working poor while doing their usual trickle-down nonsense for the very rich. Bottom line, its flat out astounding to see how ignorant people are when it comes to understanding the monetary system.
Tobin Tax anyone?
Not a bad idea, but just another one-off palliative instead of a paradigm change.
For me, perhaps the most surprising insight offered by MMT is the simple but profound proposition that U.S dollars have to come from somewhere! As I understand it, dollars are created in 2 ways: 1) the federal gov't deficit spends them into existence each year with its annual budget and 2) banks create dollars when they issue loans (which is why serious bank regulation is so important).
Question is, how do we acquire dollars that we own free and clear in our savings accounts? In can't be "bank money" because all bank loans exist simultaneously as assets and liabilities that sum to zero. And banks like their loans to be repaid in full, plus interest. So that leaves the federal gov't's deficit spending as the only logical source of our saved dollars. Unlike banks, the gov't really doesn't care if it claws back in taxes less than the amount it spends each year.
None of us has a "Benjamin Tree" growing in our backyard. So the next time you hear someone complain about the so-called "national debt" (it's really more accurate to call it a "float in perpetuity"), remind them that they have the "national debt" to thank for their financial wealth.
wally
it is too hard to tell in such a short comment, but i think you are likely right about this. the problem for mmt that i have seen is that the decisions about spending will be made by the same people who are making them now. there is nothing new about "printing" money, and it's hard to see how mmt would control it. mmt would replace lying about the debt with taxing the rich to control inflation...at least that's my take. i'd be glad to stop the lying about inflation, but i think taxing the rich has political limitations we can't solve, and encouraging people to believe in free money is not good for them. but, yes of course "deficit spending" is the way countries and banks increase wealth...but not without limit.
meanwhile i know essentially nothing about managing interest rates. but i did read a book by Bernacke and he seems to think it is an essential tool in limiting inflation on the one hand and recession on the other.
Thanks for the feedback. Two thoughts. Deficit spending is not "free money." The idea is that if resources and labor are available, why not put them to work? So, for example, if the gov't deficit spends $100 million to build a new bridge and you get paid as a construction worker on that project, you didn't get "free money." You EARNED it!
And the truth is that taxing the rich will do next to nothing to curb inflation, because the rich have a "high propensity to save." In other words, they've already bought all the toilet paper and toothpaste they need, so any extra income goes into savings. And a dollar saved is a dollar that's not chasing scarce goods and services and driving up their prices. The reason to tax the wealthy is to reduce their (currently absurd) political power and to reduce income inequality, which just psychologically depresses millions of Americans.
Oh, one more thought. You mention Bernanke. The Fed sets interest rates, not some imaginary "bond market." The idea that the gov't has to "borrow" its own money is just absurd. The Fed/Treasury should stop selling bonds altogether and make bond traders go out and find a real job. Just let banks pay "Interest on Reserves" at whatever rate protects savings from inflation and stop worrying about it.
wally
maybe some clarification: i did not say deficit spending was free money. i even agree with mmt that just printing money to pay for real work that would otherwise not get done,,is not free money. but the meters I have run into have seemed to me to be intoxicated by the idea of free money however they justify it "in theory." otherwise, the general public who so far have not heard of mmt would soon learn to think of it as free money. i get people responding to my efforts to explain SS to them saying why not just print the money?
i agree with you about taxing the rich..i think it was Kelton who explained the way to deal with inflation from printing too much money would be to tax the rich. if she reads this she can explain what she meant. meanwhile "tax the rich" is the main big idea that the Left has for solving the SS "crisis"...when just taxing workers and extra one tenth of one percent per year would end the crises completely and forever [ someone from "SSWorks was claiming taxing the rich would completely solve the problem..but no proposal for taxing the rich so frar either closes the present "actuarial deficit" over the near term or avoids it returning in a few years.
i don't like "income inequality." i like "income sufficiency" i see no value in envying the rich. neither do i see any value in making the poor miserable from inadequate wages. i do fear the power of too much money in the hands of the very rich. but those people already have the power to keep you from raising their taxes...and threatening to raise their taxes will only make them work harder to first not elect "liberals" and second "destroy social security."
i don't know enough about the bond market to question your assertion about the Fed "setting" rates. i know they do... but i wonder if they could if the market demand for money supported higher rates than the Fed wants, or was so low that even zero rates could not stimulate the economy.
"meters" was spell-check's way to fix a typo in "commenters"
"and extra one tenth" was my typo for "an extra..."
The whole "free money" issue is 99% old fogeyism and 1% inadequate/failure to better acculturate positive and constructive purpose in addition to employment. If having a lot of money was such a hard and fast road to ruin the wealthy would have killed themselves off ages ago. Life itself is set up to be a problem by its apparent reality of Dualism Only of which Trinity/Unity/Oneness/Process AKA the integrative mental discipline of Wisdom is the answer.
Right off hand I can't think of a better incentive to become gainfully employed than your first day on the job you get a 100% increase in your purchasing power with a 50% Discount/Rebate policy at retail sale. Then just craft additional policy that mitigates overconsumption like a sliding scale percentage of required "tax"/Gift of Gifted money into eco/energy and infrastructure bonds at a 5-6% rate. You could also require that one average at least part time employment for the first 5 years of receiving a $1000/mo. universal dividend or have it reduced by half, and then have it made whole by 2 years of part time employment.
Things like that. Monetary Gifting strategically implemented with 50% Discount/Rebate at retail sale and a universal dividend immediately resolves the deepest problems of modern economies and opens up additional benefits like being able to eliminate payroll taxes for welfare and unemployment insurance and lowering income taxes across the board because having resolved inflation at retail sale we could cognite on the fact that a monetarily sovereign nation doesn't really have to tax at all except to enforce compliance by economic agents and prevent/effectively blunt the power of oligarchy from dominating the society.
Visualize it.
Steve
in the first place the payroll tax is not "welfare" it is you saving your own money for your needs after you can no longer work. it has to be a "tax" because too many people think they are too smart to need it... like they are too good drivers to need speed limits and stop signs. in return they get the best insurance for their savings that anyone can get in a capitalist society.
other than that your essay is so sky-high abstract it is meaningless...no insult intended, just an observation about "abstraction."
and, finally, "you could also require..." should ring alarm bells.
the "free money" issue has nothing to do with "having too much money." it is a real phenomenon visible in the rhetoric of people who think modern monetary theory will enable them to get whatever they want at no cost to themselves. you can see it in public spaces, no need to "visualize it."
You can call it whatever you want the fact remains that the 50% Discount/Rebate at retail sale and universal dividend policies accomplish what payroll taxes do without diminishing an economic agent's purchasing power or revenue, and they also have the advantage of resolving at least three of the economy's supposedly most thorny problems.
There's nothing abstract about a monetary gift.
In order to fully understand life you DO have to think in terms of ideas like duality and trinity, unless you want to simply react to life instead of trying to more deeply/wisely understand it.
Finally, I've said many times here that MMT has the mechanics of money creation correct. That doesn't mean I think it will resolve the money "problem" all by itself. Its an insightful palliative of the problematic monetary paradigm. What we need however is to actually change the monetary paradigm.
Warren Mosler argued over 30 years ago that the Fed doesn't sell bonds to "borrow" money, it does so to remove excess currency from the banking system. If the Fed didn't do this, all banks would be flush with currency and would never have to borrow in the overnight market to settle accounts. This state of affairs (many lenders but no borrowers) would drive the interest rate down to zero (which MMT calls the "natural rate"), which would screw up the Fed's target rate of about 2%.
The problem with the bond market is that the buying and selling of treasuries creates the illusion of the gov't borrowing its own currency, which is absurd on its face.
Leaving this erudite exchange to one side, I predict COPOTUS Musk will try to use the debt ceiling to impound spending he disfavors. But Trump may figure out that too much deficit-howling will get in the way of yet another round of tax cuts.
Doesn't Musk have Aspergers or something? I swear the whole Trump clown car of nominees makes me think Putin does have a video of Trump getting a yellow shower from Russian prostitutes and has told him to create bureaucratic chaos....or else. If he nominates a horse to head the NSA we'll know it for sure.
The Threat to the U.S.A. — Weakened or privatized inherently governmental functions will break down existing layers of internal control checks and balances in order to obtain power and control; and a more direct access to the U.S. Treasury by individual interests.
I was happily able to attend the “Finding the Money” premier in San Rafael last Fall. Since then, I’ve been startled by the number of people in high places who clearly don’t understand the meaning and implications of “national debt” (even at the NYT).
The gist of MMT seems to be that, for countries with sovereign currency, funding for necessary productive activity does not need to be an obstacle. Yet alongside that, another key consideration lies in not inflating the money supply with spending that does not produce real value. Much if not most economic activity these days is designed primarily to churn dollars — i.e. to “make money”, and whatever value created is secondary.
Money is supposed to be a medium for the exchange of value. Yet if one’s goal is to amass ever-increasing amounts of monetary wealth, any actual value offered in exchange is an impediment to that goal. Accordingly, we arrive at a range of perverse scenarios -- speculative investment, rents and interest — where money makes money off of money without creating any actual value. In worst cases (e.g. hedge funds), money increases by actually destroying value.
A Practical Solution
If the core of of the problem centers around hoards of money that increase without limit, the clear solution is to impose some sort of limit. In the current socioeconomic context, a progressive wealth tax such as that proposed by Senators Sanders and Warren would be a step in the right direction. Even a child can understand that the beneficiaries of a particular system ought to pay back in kind, in support of the system that enabled their success.
A More Idealized Solution - Entropic Currency
The problem for most physical forms of wealth is entropy — they tend to deteriorate over time, or are subject to forces that deplete them — like theft or rot or conquest. Today’s form of money however is not a real, physically existent thing. Our “fiat” currency is simply a concept —an idea we all agree to. It can exist in perpetuity, so long as we all continue agree to it. The unfortunate consequence is this enables someone with sociopathic leanings to hoard monetary wealth far beyond any need or reason — with the destabilizing social, psychological, political and environmental consequences we currently grapple with.
But if what if “entropy” were designed into a monetary instrument? That is, what if any issuance of currency gradually lost value over time, and ultimately had an expiration date? That would encourage the use of money for its intended purpose — as a catalyst for commerce, since today’s dollar would be worth less month by month. The more that money circulates, the more it changes hands, the more robust and equitable an economy tends to be.
Such scenarios (“demurrage” or negative interest) were tried in the early part of the last century as a parallel to the national currency during times of economic depression. (Apparently the Swiss WIR Bank is still functioning today, though I don’t know if the format has changed.) (1)
The early forms of demurrage money consisted of physical bill that had to be periodically renewed with the purchase of a stamp (“stamp tax”). Today, physical currency comprises only a tiny fraction of circulating money. However, now that most forms of currency are digital, existing only in electronic ledgers, perhaps each unit of currency could be “stamped”/tagged with an issuance date and an expiration date. For example, a December 2024 dollar might lose value at the rate of 1% per month, rendering it valueless in roughly ten years.
The above might go a long way toward discouraging the long-term hoarding of such dollars, thus eliminating the egregious hoards of monetary wealth that are currently destabilizing civil society, politics, and planet.
In today’s complex economy, it may be difficult to entirely change over to such a monetary system, yet “complementary currencies” such as the aforementioned WIR work in parallel with the national currency. We do generally acknowledge distinct economic domains, as suggested by the memes “Main Street” vs “Wall Street”, so perhaps such a parallel currency system might be explored as better serving the needs of the country at large.
(1) https://www.resilience.org/stories/2016-09-28/wir-currency-reinventing-social-exchange/