Yesterday, CNN’s Chief Congressional Correspondent, Manu Raju, shared a draft letter that is being circulated by a coalition of House members, including Reps.
Read the Deficit Myth - her book. It’s very accessible and basically yes - any government that issues it’s own currency and doesn’t peg it to anything- gold, another currency, can afford to do what the US, UK etc did during the pandemic- invent loads of money. Inflation is the limit and that only arrives when production is limited by capacity - ie full employment or scarce resources.
MMT is an analysis of currency, federal finance, monetary-bank operations, and macroeconomics.
MMT economists are adept at using this lens wherever there are any of those currently, historically, or prospectively at play.
What is true among these areas for some countries might be quite different in others eg does the country peg its currency, is there a national central bank, is there considerable debt owed to a foreign country, are there more than one industries/sectors in the economy, is the country at war or had been recently devastated by conflict, what are the state of resources available to the central government.
Certainly MMT analysis of one monetarily sovereign country is essentially true of all monetarily sovereign countries albeit differences in scope of economic industries/sectors, resources.
Monetarily sovereign countries are fundamentally characterised by floating their national money of account aka currency, not pegging the currency to a foreign currency or commodity (eg gold), and spending by fiat aka decree i.e. political will in govt. Some examples of monetarily sovereign countries are 🇺🇸, 🇯🇵, 🇨🇦, 🇨🇭, 🇨🇳, 🇦🇺, 🇬🇧
A few points Tom, if I understand you correctly maybe MMT works based on a number of variables in the economy in question. Do you have an equation you can share where these variables can be input and an answer comes out ?
Another point if I understand you correctly the government continues to print money until under MMT inflation takes off. Then the powers to be stop printing. That's like taking drugs away from an addict, what do you think will happen?
Re: your second point. Stephanie is on record many times now showing that the budget process can include offsets if necessry to proactively guard against and otherwise prevent problematic inflation pressures. But she has also said quite adamantly that offsets are usually not required because of ample fiscal policy space in the economy - in other words low problematic inflation risk. https://mobile.twitter.com/StephanieKelton/status/1367125555380969473
Keep in mind the 🇺🇸 hasn’t seen any problematic inflation since the petroleum supply shocks of the 1970’s.
When you look at the spending during WWII that brought the country to full employment matched by maximum use of resources we can see there a precedent for how to spend while managing shortages & inflation risks.
MMT economists have said that the way currency issuing govt’s spend is by fiat - aka creating money into existence given the votes in eg congress. For example when govt wants to provision itself with labour/resources it spends its own national money of account (as granted to said govt by its constitution) into existence aka the economy - by instructing its bank eg Fed to deposit appropriations into the relevant accounts in the private sector. The study & analysis done by MMT economists that objectively shows this spending process as fact is spun by neoliberals into anti-MMT propaganda using language that triggers fear in the minds of us currency users in the non-govt sector eg “MMT advocates for limitless money PRINTING!! THEY’RE PRINTING MONEH! THEY’RE PRINTING MONEH!!”
I certainly would never equate govt fiscal policy used to serve the public purpose in any way to drug addiction. But I might equate that to neoliberal policies that drive cash flow to the wealthiest .01%.
Again the precedent is WWII where the govt (free from a domestic gold standard constraint) was able to spend for existential purposes and what followed was a middle class golden age due to winning war(obviously) and an appropriate size money supply to create demand and jobs (our economy runs on sales afterall) given govt deficit spending, without which we would’ve returned to a devastating recession.
"MMT economists have said that the way currency issuing govt’s spend is by fiat - aka creating money into existence given the votes in eg congress. For example when govt wants to provision itself with labour/resources it spends its own national money of account (as granted to said govt by its constitution) into existence aka the economy - by instructing its bank eg Fed to deposit appropriations into the relevant accounts in the private sector. ""
This is all FALSE. What is true is that this is what MMT economists SAY.
But it's false. And if you think about it for a Moment, then the problem is obvious.
There is NEVER a question of how government spends - there's money in the TGA account and they pay it out from that account and viola - my Social Security payment arrives tomorrow. Same for ALL government spending.
No mystery - but only half of the equation.
What is missing from this part of the discussion is from where does Guv get its income. The answer, despite Kelton's errant admonishment otherwise, is simple.
Government taxes incomes and government BORROWS.
Yes, taxes and Bond proceeds finance the government.
No surprise, really.
Every Penny of income and every penny of spending is reported and accounted.
There's no mystery really, despite the MMT conflations in effort here.
There is NO PRINTING of money (there should be).
There is NO TELLING the Fed to Pay anything.
Please cite somebody's job to do so. LOL.
There is no money created by Budget votes in the Congress. NONE.
EVERY Bill that passes the Congress includes APPROPRIATIONS language.
Ever read the Constitution on APPROPRIATIONS ?
The Money can only and MUST be appropriated .... FROM THE TREASURY - meaning the money must be IN THE TREASURY first in order for it to be appropriated.
That's a biggie Kelton lie there.
Please tell her I said so, as she knows better.
You, Tom, are also repeating the MMT hogwash and misleading your followers.
And your abuse of the term "objectively' should be criminal .
There is no ANTI-MMT propaganda.
There is only monetary and fiscal truth and understanding that is standing in your way.
Money is a medium of exchange. If the currency issuer (our government) does not print money, there is not enough money for the economy to grow. Taxes does NOT pay for federal spending. FDR balanced his budget in 1937 to appease the Republicans, and guess what!! A depression followed in 1938. That is a pattern that has been seen again and again throughout history. The rich may not pay enough in taxes. That impacts income inequality. It boosts the stock market while the majority find their incomes purchase less. But where they really benefit is with all the government programs that feed them money, like the ACA, and military-industrial complex spending, private prisons. Those businesses are not entrepreneurial, they are not to be admired, they are government funded industries that give little benefit to the people.. Money cannot be finite. Assume for example, there are only 40 ounces of gold in the world and only 40 people in the world. Each person has ONE ounce of gold. What happens when the 10 children of each of the 20 couples the 40 people make grow up and want families of their own. How are they going to share those 40 pieces of gold so that everyone can purchased needed products and services?
Money is NOT finite and it can never be if we are all to survive and we should ALL SURVIVE.
What’s in the Treasury account is just bookkeeping.
You Libertarians need to learn the difference between the government sector and the private sector.
You said:
“The Money can only and MUST be appropriated .... FROM THE TREASURY - meaning the money must be IN THE TREASURY first in order for it to be appropriated.”
When 🇺🇸 govt passed Covid legislation was the money already in the GA ? No.
When FDR signed into law the New Deal & later funding for WWII legislation was the money already in the GA? Obviously no.
What’s criminal is the murder by proxy done by neoliberal, Libertarian policies of austerity born out of ignorance of failing to understand the difference between the government sector and the private sector. Is this the flavour of debate you want to have ? Out of respect for Prof Kelton I’m trying not to go there.
Good job you don’t know me or you would ignore my comments.
Been happening over a dozen years.
Ask Grumbine – who shut me out of RP a few years ago; Stephanie – who shut me out of NEP well before that, or Mosler, who shut me out of the Center of the Universe back in ’13 when I corrected him about Nixon’s “Gold-Window” canard. Later he sent an email : “technically, you’re correct.” LOL
I stand 100 percent behind EVERY comment I make.
I have to. And I don’t make any claims that can not be proven.
I’ll gladly get to the APPROPRIATIONS matter. That’s why I raised it.
But, Libertarian?
For the record – I am a radical progressive monetary revolutionary.
My politics are radically progressive (Green Party), and my goal is a Public Money Revolution …. With a pen.
And I never make any bones or apologies about that, no matter where I am.
Having said that and having studied the national monetary system under my Dad for over fifty years – yes, over 50 years – I will acknowledge that the first four or five of those years was in a deep study of Austrian Economics. I have all the key Austrian authors on my bookshelf. And I still rad them occasionally and subscribe to a half-dozen Austrian websites.
But it was me who taught my Dad of the errors of what you call Libertarianism.
He became a social Liberal- economic Conservative
I became a revolutionary. That’s why I’m here, trying to defeat MMT which is (central banking) Bankers Money School CAPITALism.
It’s why I worked hard as a Green Party Team Member to destroy MMT’s attempt to remove Public Money from our Platform back in ’18, from where it has been for over a decade.
Libertarian Warren Mosler - Keep Deficit and Eliminate Taxes (MMT for Conservatives Part 3)
For some reason, all the Post-K’s were fooled by Mosler’s ‘reserve adds and reserve drains’ instead of following the thoughts of their P-K leaders – …. Or PRINT THE MONEY. THEN
Tom: “”When US govt passed Covid legislation was the money already in the GA ? No.?”
Tom, I said it must be in the TGA before it can BE Appropriated, and spent.
It MUST be APPROPRIATED FROM the Treasury.
I didn’t say - to be in the TGA before legislated, that would be self-defeating.
On the COVID legislation ( Senate Bill 3548) have you read it?
The entire Appropriations Paragraph begins with these words :
EC. 1106. Direct appropriations.
(a) In general.—There is appropriated, OUT OF AMOUNTS IN THE TREASURY NOT OTHERWISE APPROPRIATED out of amounts in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2020, to remain available until September 30, 2021, ( MY EMPHASIS )
Like I said, it is in EVERY piece of legislation that requires spending. Just like that.
So, yeah, the money MUST be in the Treasury before Authorization and Appropriation can result in “spending”.
Read it and weep, Stephanie.
But I feel certain she knows this – being why she never spoke MMT to the Congress or Treasury.
Why not hold her accountable for this outcome ?
Tell her I said so. Ask for her comment. Something. Accountable.
LAST
“”What’s criminal is the murder by proxy done by neoliberal, Libertarian policies of austerity born out of ignorance of failing to understand the difference between the government sector and the private sector.””
WOW. Pure Grumbine.
While total-Grumbine, it really just shows WHO doesn’t know where the PRIVATE central-banking FRBS Bank falls. Ans. NOT in the Public Sector.
Also why TSY – CB Balance Sheet Consolidation between these sectors is a Moslerian Prank on y’all followers.
Steve Grumbine is a well-meaning but monetarily-ignorant Putz.
It seems like you are looking for a deeper understanding of MMT. Your skepticism given what most econ majors and others are taught is understandable. I think you would enjoy reading "Modern Monetary Theory" by Wray. He has the equations you are looking for and much more. The MMT model of central bank finance is the correct one. However, as they admit, and as Kelton explains here, there is more to the economy than that.
There is no evidence that there is THE cause of inflation. That's old MF economics ala Milton Friedman. The evidence is overwhelming it's simply not true.
Inflation while it is not close to one of the major problems facing us, considering what the future potentially holds for future generations (nuclear war, global heating, destruction of habitats and ecosystems, etc.), can be a source of some economic friction. If the banking system creates too much credit given overall supply constraints, the type of systemic inflation that MMTers consider the most troublesome, the suggestion is to take reduce the monetary base by taxing or by having the USA government tax or buyu bonds.
As you rightly imply easier said than done given that the government is controlled by the super wealthy
As for your first point: “MMT works based on variables…”
MMT is strictly analysis. The analysis done by MMT economists is objectively true and factual aka working/works in explaining currency and its relation to govt finance, macroeconomics, monetary/bank operations.
So, can you re-word your question to very specific concerns/ideas about what you want to see as working in a monetary sovereign govt that could also work in a non-monetarily sovereign govt?
Now, I personally am in no way an expert on economic formulas but it seems that is of utmost importance to you. In that case you might present that question in a way not directed as a reply to me.
That said I’m familiar w/the basic sectoral balances equation that where there is a surplus on the govt sector side there must be a deficit on the non-govt sector side of the balance sheet, and conversely where there is a deficit on the govt side there must be a surplus on our side (public sector/foreign sector)
(I-S) + (G-T) +(X-M) = 0
Bill Mitchell, a leading MMT economist, writes often utilising formulas to further explain the subject and I would refer you to his website and countless articles eg:
I believe she did answer when she said that any government that issues its own currency can never run out of money. The issuing government deals with inflation via taxation.
That's right, but I think according to MMT, the issuing Govt deals with the Economic problems of (1) Inflation & Deflation (2) If the Currency Issuing Govt has the human, material & technological resources for sale in it's own currency (3) Well I would add this: The fears the Public have about Govt Spending. Funny how they are not afraid of Bank Created money by the Credit Creation Process, which is a lot of money injected into the economy, mainly straight into Housing and Financial Assets.
You need to differentiate fiscal & monetary policy. Responsible democracies will not give politicians unfettered control over fiscal spending. The risks are corruption, pork barreling, and resource scarcity leading to unnecessary inflation. Monetary policy should always be in the hands of an independent central bank. Taxation and fiscal frugality are powerful anti-inflation tools, but politicians need to fine tune where the burden falls.
MMT is not for every democratic country because the risks are not sufficiently controlled by governance and engagement with the electorate. It works in Japan due to the homogeneity of the people. It works in China due to the subjugation of the people and industrial system. It may not work in democracies where powerful vested interests exercise extortionate influence over political decision makers. Like USA.
David thank you for so correctly stating the problem with MMT. You do it so much better then I. Your reference to China is on the mark I hope others read you comments and grasp your insight.
Governments (generally) issue their 'currency' - which is Bills and Coins.
In the US, the private Fed issues the Bills, and TSY issues the coins.
So, there's not enough 'coins' issued by Guv to fund government spending and thus, ALL GUVs need taxation and BORROWING to provide income for spending.
Or, they would run out of money. QUICK !!
While governments differ widely on the currency-issuing powers and prowess, no government on this Planet uses other than the (central) Bankers Money system, and thus any Guv must finance its spending using central banking monies.
This is an incontrovertible fact.
MMT is hyperbole cooked up in Opacity and shoe-horned into a non-existent public policy. FALSE.
The Fed will swap paper dollars for reserves on a bank’s balance sheet when a bank foresees a demand for paper currency eg in the run up to Christmas or summer holidays. No big deal. And the bank can always swap paper $$ back for reserves into their reserve account. And further back in the process you will find paper dollars originate from the Treasury’s Bureau of Engraving and Printing.
You might want to throw out your Taft and Hoover era text books because we have a central bank now and a reserve system where settlement funds (reserves) are used to settle trillions in transactions everyday. As pointed out to you elsewhere on this page ALL profits from the Fed are remitted to the Treasury less expenses.
The Fed is a creature of congress and must follow / obey any laws passed by congress directed at itself. Further if the congress decided at some point to dissolve the Fed it could do with a law per the authority granted to the congress by the Constitution.
Quick Google searches bring up articles relating to the fact that the Fed must follow laws passed by congress, just as say the military branch would also have to follow laws passed by congress pertaining to it(military branches are also part of the government but retain some powers of independence within congressionally approved scope):
“ The 115th Congress is considering a number of bills that would affect the Fed’s monetary policy, lender of last resort, and regulatory responsibilities. Although these bills contain numerous wide- ranging changes, most provisions can be grouped into five broad categories:” https://fas.org/sgp/crs/misc/R44848.pdf
“ McFadden Act of 1927
February 25, 1927
The Federal Reserve’s success led to this legislation, which President Calvin Coolidge signed into law in February 1927. The Act rechartered the Federal Reserve Banks in perpetuity, liberalized branch banking rules, and revised a wide range of laws related to the treatment of banks that were not members of the Federal Reserve System.” https://www.federalreservehistory.org/essays/mcfadden-act
“The Durbin amendment also known as Regulation II[1] is a provision of United States federal law, 15 U.S.C. § 1693o-2, 👉 that requires the Federal Reserve to limit fees charged to retailers for debit card processing. It was passed as part of the Dodd-Frank financial reform legislation in 2010, as a last-minute addition by Illinois Senator Richard Durbin, after whom the amendment is named.[2]” https://en.m.wikipedia.org/wiki/Durbin_amendment
Federal Reserve: somewhat private, somewhat independent, creature of congress that acts as an agent of the 🇺🇸 govt and is required to follow all directives by the congress passed into law.
George, google "Fahdel Kaboub". Ploenty of writings, audio and video to be found. He specializes in applying an MMT understanding to countries that are resource poor and lack currency sovereignty. MMT is an understanding, not a regime.
They're from the neoclassical/neoliberal school which completely dominates mainstream econ. It is difficult to admit everything you've learned, taught, won Nobels for, is largely incorrect.
I disagree that Summers ain't a schlemiel. Total schlemiel.
Krugman ?
Ever seen the YT video where former monetary-Economist and Euro-Banker Bernard Lietaer reveals Krugman's tale of going to Princeton and telling them day-one that he wants to study the Money System.
Advisors say, do that, or else become an Economist, publish papers, become a professor, maybe have a chance at a Nobel. Your choice.
We know which way Krugman fell.
His inflation critique of MMT is way off the wall.
But even among the Post-Ks out there, not a lot of support for MMT.
It's odd isn't it Steve? This is how I see it, a bit of a guess though on why people do this:
Intellectually understanding a theory of economics & winning a Noble Prize is a TOTALLY different skill set than the emotional upset of not only recognizing that part of one's work is based on basic mistakes or omissions, but then saying it Publicly to a Public which sneers at MMT. That would require a huge love of seeking Truth, and a faith that the Truth is always going to be for the best, such as creating freedom, no matter what.
Especially if someone is very emotionally attached to their very, very good reputation. That is not easy, and he may not even desire it, or have any faith that is a worthy path to seek & tell the truth.
Mosler: "Krugman is intellectually dishonest. I met him for dinner here on St. Croix several years ago and after several hours of discussion he fully understood it all, to the point where he interrupted me to better answer a question from his wife. We haven't spoken about it since..."
It's critical the citizenry learn the truth about our politicized and wrong headed fiscal policies relative to our currency. Republicans are much bigger liars about it than most democrats., especially "Progressive" democrats.
Stephanie is the very person with the understanding and will to show this reality to those who don't know, and show up those liars who do know, but wish to deny it to the rest of us.
Hey there Mac. May I comment on that, as we would likely have our goals aligned on MMT?
I'm not interested in having a partisan conversation about Parties, but about promoting the acceptance of MMT (& also Private Bank created Money, another topic).
Is your purpose the same on MMT?
If so, then please read on:
It is true that Republicans & Conservatives tend to be more distrusting & dismissive of MMT, and Progressives tend to easily be open to it. The former tends to value "Keeping what has value"/ "if it ain't broke don't fix it"; and the latter itends to be open to new ideas & also spending Govt Money.
But despite that, what I personally see as someone who listens to such people, is that one of the biggest reasons that they are dismissive of MMT is because it is popularly associated with Alexander Occasio Cortez (AOC), rather than Kelton or the rare Conservatives that promote MMT. I would also tend to feel the same way, she is not someone I trust either in some ways (though why is of no importance in this matter).
I also note that MOST of the time I hear Progressives talking about MMT and Conservatives are quoting it, MMT is being very much misrepresented and used to sell a sense of entitlement, or promote economic carelessness, rather than why MMT is a primarily accurate description (from which sensible policy flows) & useful for everyone (inc Conservatives who want lower Taxes).
I do not agree with your claim they "lie" about MMT or are bigger liars. They have a different world view & feelings about money different to mine. Some of them are not open to a rethink of economics & have firmly set feelings about money & what it should be.
They tend to understand that money is created out of keystrokes to some degree.
But if we treat MMT & money creation & destruction as a Partisan issue - as a lot of people do - I think they do the Public understanding of MMT a big disservice. Conservatives & Repbulicans actually could use the same understanding to lower taxes or Private health care bills; or fund Charter Schools better.
Thanks Stephanie. This is only indirectly related to this article you wrote here concerning Govt spent/created currency & infaltion fears , but what about Private Bank created money (Credit Creation Process when a private bank makes a loan)?
Professor Richard Werner deals with this. Why do MMTers not talk of this, or how much of each economy is made of of Bank Created Money??
Have you also read his book "Princes of the Yen"? I would love your view on it - it influenced me a lot. I think it explains the mistrust of Central Banks and thus MMT indirectly too by some people (not me, regarding the latter). It is basically about how his own work experience showed him that the Central Bank of Japan wanted to disempower the Treasury & it's own economy to fail for selfish reasons (it's own staff admitted this in private); and apparently some central banks like the ECB seem to be doing similar things.
Lost in the glowing MMT cloak being drawn around fiscal reality here is the very real and lawful fact that only the declaration of a national emergency for the COVID Pandemic facilitated all this falsely-claimed MMT fiscal-finance (actually plain vanilla deficit-financing to pay for spending), being an emergency that suspended the debt-ceiling - among other things - an emergency that allowed some $5 or $6 Trillion in new debt to be rolled out un-challenged.
While it's uncertain when that 'emergency' law will change, Her Treasury Meister Yellin has already informed Congress that Treasury is implementing emergency measures to keep paying some Bills and not others until the end of the Fiscal year.
No Economic Emergency equals No Borrowing by the Guv.
And why should Guv borrow in the first place when the Constitution grants Congress the money creation and issuing powers now usurped by private Fed bankers - who create new money from nothing and lend it to that government ??
Why does MMT not support THAT debt-free self-financing option?
I guess we had to put our big girl dress on today and stop pretending there's any 'keystroking' to be had to pay for stuff - now it's just BORROW !, BORROW !! BORROW !!!.
Whatever happened to BONDS can not finance spending ? LOL.
Thanks, MMT, for nothing …. But ……. Perennial Debt and confusion.
Thanks, MMT, for nothing.
.
So, in other words, Dr. Kelton is faking that MMT has driven these 'emergency' outcomes of piling on the debt that must be repaid by taxing incomes, as it was rather the outcome of the Pandemic's economic emergency.
The way you ricochet around, it's as if you don't want anyone to follow an argument in a way that can be understood. It's as if you're not writing in English to me. Granted, I'm not a trained economist, but as an example, the last sentence above doesn't seem to mean anything. "MMT has driven these 'emergency' outcomes of piling on the debt that must be repaid by taxing incomes, as it was rather the outcome of the Pandemic's economic emergency." Not only hard to read or interpret but just plain squirrelly. If you're not a bot, sorry for the implication, but it doesn't appear you want to be understood by normal people. It's not like Dr. Kelton has any control over institutions for her to "fake" anything. Nevermind. I'm sure it's all clear to you.
I just read that sentence you quoted and – it took a minute – but I am nodding in agreement with all those descriptors you applied, but also realize that the sentence NEEDS something beyond explanation to be understood. Correction.
More than a bad typist - writer fault to now realize that a tiny word had been omitted, and one that would, I hope, lead to a more clear understanding. I hope.
That omitted word was ‘if’, so maybe more consequential - and its use in that clause becomes “
, as if it was rather the outcome… ,
As if. And then in the context of ending my comment about public debt and MMT’s denial of the need for Borrowing to pay our Bills, which is patently false and easily provable, the sentence in total becomes…
. "MMT has driven these 'emergency' outcomes of piling on the debt that must be repaid by taxing incomes, as if it was rather the outcome of the Pandemic's economic emergency."
In further explanation and emphasis - on my quick reference to the people needing to pay these debts.
People. Businesses and corporations, if I may,
ALL of that public debt could not possibly be more real as a lawful financial obligation of our government and nation, and ALL of it MUST be repaid to its holders.
From the perspective of fiscal administration, the only valid source for income for the government to pay its debts in a debt-based money system is taxing the money from people’s incomes - and paying the people’s income tax money over to our government’s creditors.
When this chat takes center stage, the bankers are taxing our incomes using this public debt - being a further enrichment of themselves and their privileged others. The rich get richer. The poor get the picture. This is how they do it.
Maybe the government needs to take back the money system and the money power - the authority to issue our money debt-free into circulation, exactly as was publicly advocated by over 400 economists back when they mattered – in 1939. This was responding to such a proposal by Irving Fisher, Paul Douglas and other progressives
What matters is who issues the money – for politics. And how it is issued – for economics.
Joe, get your accounting straight. Look at the Fed's balance sheet where cash and reserves are federal liabilities. So treasury sales are swapping govt treasury liabilities for govt central bank liabilities, not "borrowing" as you think; and federal revenue is redemption of govt liabilities, not transfer to govt of some third party's liabilities, not "funding" as you think. All federal spending is liability issuance, not asset recycling.
Thanks for what you think you know, Alan. All wrong as I will show.
Is my accounting reference .... crooked'? Or just wrong ? Which one? Say what is wrong, and correct THAT. With accounting RULES, reporting history and law.
Your attempt at shoe-horning MMT's "consolidation conflagration' into EITHER government or central bank accounting, or BOTH, is a fraud. And, fails.
FIRST, ""Look at the Fed's balance sheet where cash and reserves are federal liabilities.""
NOTHING about the Fed's Balance Sheet is either a 'federal' asset or liability.
When it comes to financial reporting and Balance Sheets, 'federal' is the national government.
The "Fed" (Federal Reserve Banking System) is a private BankCorporation Cartel - its ownership, Management and Profits go to finance itself and make profits for its private Member Banks. It can not report on the Treasury's liabilities.
That's the 'reporting Entity' part of the Accounting Rules.
Only the Treasury's Balance sheet lists "federal" assets and liabilities.
Read the important Note on the Fed's role of Fiscal Agent for this Entity.
SECOND _ " So treasury sales are swapping govt treasury liabilities for govt central bank liabilities, not "borrowing" as you think;"
As I think? May I show?
Nice try. More ignorant conflation - all provable. So, please DO hang in here.
Not "borrowing" ?
Treasury Issuance is not a borrowing?? LOL
31 U.S.C. § 3104 - U.S. Code - Unannotated Title 31. Money and Finance
§ 3104. Certificates of indebtedness and Treasury bills (a) The Secretary of the Treasury may BORROW on the credit of the United States Government amounts necessary for expenditures authorized by law. (my emphasis).....
Reach back and pull your head out.
Stop talking through your here, Alan.
The Fed is not an agency of the government, not owned or operated by the federal government, nor does the federal government "gain" from its operations - even though the Treasury pays for all of the Fed's Salaries and Rent and 3-hour Lunches - through chicanery. Let's talk about that.
You use the term "treasury sales' - as if there's only one flavor. To clarify for the open-minded reader.
1. When TREASURY sells its new Bonds, Notes, etc is one thing (as in T-31, ss 3104 qbove) - THAT is when government is funded. That is when the TREASURY is the Seller.
2. When TREASURIES - i.e. those same Treasury Notes, Bills, etc now held by banks and individuals are sold BY THE BANKS on the Fed Open-Market - then Alan, the TREASURY is not involved in the Transaction. There is NO REDEMPTION of anything.
THE FED runs the Open Market Account Sales, and the FED itself is the BUYER. To repeat, The HOLDER (bank) of the Treasury is the Seller. The Fed is the Buyer. The Fed pays with reserves to the Seller's Bank.
Conflation, conflagration, anecdote, meme, innuendo = monetary opacity ... - the currency of MMT.
Your last statement is too ignorant to grasp.
Spending of tax revenue is liability issuance by the government.
Heaven help us all to overcome real (Moslerian) monetary ignorance.
The Constitution creates a government comprising a legislature, a judiciary and an executive. One of the many executive agencies created by the legislature is the Fed.
The Fed honors payments authorised by the legislature and made by other parts of the executive by increasing its liabilities to payees’ banks which in turn increase their liabilities to payees, measured in dollars. The Fed’s liability to a bank decreases, and that bank’s liability to its customer decreases when the customer settles a requirement for revenue. Treasury instruments are term limited interest bearing federal debt. Fed reserves are termless interest bearing federal debt, exchangeable for federal bank notes which are termless non interest bearing federal debt.
Tokenistic Fed shareholdings and muddled nomenclature complicate the picture.
"One of the many Executive Agencies created by the legislature is the Fed."
Really? Alan?
No.
Who told you that? MMT ?
Can you prove it?
Ever read the Fed Act where they make the Fed an Agency of government?
Neither has anyone else. I guess they forgot that detail.
I've even met people working for the Fed saying it's a government agency. It's in their own reports. Because they want YOU to think it's true,
LOL. I asked, directly, years ago, on their website.... Where is the Agency authorized by law? Nothing.
Please provide any evidence based in law or regulation that would make the Fed - a completely PRIVATE organization - an AGENCY of the government.
Is there ONE employee of the 12 Federal Reserve Banks that is a Public Employee? No. Yet we pay for their salaries.
And please lose the faux 'tokenistic' gesturing.
Or, show what I said has no value.
On another fake matter, as I have asked before, please show ANY EVIDENCE that the Fed follows the directive of the Congress to 'fund' any Program spending.
It does not exist. More MMT lies.
RATHER - the Congress can authorize its spending through "Authorizations Bills' and 'Appropriation Bills' but that has zero effect of putting money into the Treasury Account . The Treasury STILL and ALWAYS must come up with the dough. (Taxes and Bonds)
Are you unaware of the impending shutdown of government payments because they're broke ? Gawd, talk about unnecessarily going down with Mosler's Ferry.
Having endured this MMT engagement for about a dozen years now, there's nothing new in your confusing, misaligned statements lacking law, history or even logic. Whenever MMT gets to the end of its rope - Rinse and Repeat. Louder.
"Hey. Read MMT!" I already have. Everything except the textbook ($$)
APPROPRIATIONS - Constitution
Article I, Section 9, Clause 7:
No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.
Got that? Even the Congress is limited in its largesse over the Purse.
And it is the requirement for an Appropriation FROM THE TREASURY that accompanies every funding Bill in the Congress.
That means the money MUST be in the Treasury (account) first.
Let me know if you want any examples.
So all this 'Congress instructs and the Fed pays' is total B.S. - a conjuring of Mosler for the monetarily ignorant - which we all are naturally because the money system is not taught in any college or university in the country.
What a great LANE for the Moslerian-Libertarian juggernaut.
And all them Post-K liberals jumped right in.
Too bad, alan, that you and the other good people are drinking Mosler's KOOL-AID.
Finally, please.
I have provided links to the Government accounts and Reports.
NOWHERE in the government accounts or reports do you find C.B. reserves listed as interest-bearing ( an enigmatic logic is at play here) liability of the government, so why not bring Kelton, Wray, Fullwiler or Gray in here to argue these points, because, though well-stated in fiction, comments are all easily shown false by facts.
Despite the annoying ad hominem flavours employed by Joe I would point out one simple fact that the Fed returns all of its profits to the treasury less expenses; something unheard of or in any way acceptable to a firm in the private sector:
Thanks so much for 'choosing your poison' - to defend and mislead your favored MMT readers….. TRY.
Only thoroughly LENS-informed MMT idiots (a broad charge) don’t seem to know FROM WHERE the Fed Banks ACQUIRE ALL OF THEIR INCOME.
It’s from us – the U.S. taxpayers.
And, for the record – coming from someone who has studied Combined(consolidated) FRB Annual Reports for 30+ years, the Fed (FRBS) is not allowed to ‘make a profit’.
They operate as a (net-income) non-profit, and what they collect for ‘income’ is our payments of interest cost on the Bonds they hold.
Funny thing, eh, Tom?
The Fed Banks buy Treasuries through the FOMA …… for nothing.
We taxpayers pay interest to those Fed Banks just as if they were a Pension Fund.
That interest income is all of the actual income of the FR Banks.
Then we pay $Billions in Fed Salaries and Benefits at both the FR Banks and the FR BoGs, and the FOMC, etc, all their rents, and again three-hour lunches ( it is WE that pick up that tab)
Then we pay any of their Losses (Many Billions some years)
Then we pay the interest on the reserves(IOR) that the Member Banks pocket.
ALL OF THAT WITHOUT CONGRESSIONAL OVERSIGHT
and then AFTER ALL THAT IS PAID and deducted from FR Banks’ income,
The FR Banks return to us the NET INCOME, not the Profits, that is left over.
The Fed does not share their Profits.
The FED returns TO TREASURY a portion of the payments that OUR TREASURY has paid to those Banks.
True Story.
If you read the Fed Annual Reports, it’s all in there.
We pay the Bills.
They Pay nothing.
They give us back the change.
Only an MMTer could polish that socio-economic turd to make the Fed the good guys.
It's funny that the interstate highway system is always cited as a good thing. They destroyed dozens of urban cores, displaced millions of people, poisoned the remaining population for generations, and set the course for what seems like irrevocable climate change. I can't think of a 20th century government expenditure with a worse track record.
Read <i>Seeing Like a State</i> by James C. Scott for many such examples. The interstates are comparatively benign compared to the "villagizing" and "collectivizing" of Russian, Ukrainian, Tanzanian, etc. farms.
I'm a big fan Dr Kelton!! An 87 year old, double average citizen, who happened on to MMT about 3 years ago trying to better understand gov't budget,fiscal,monetary operations .Bottom line, MMT just makes so much common sense and needs to be introduced and promoted widely.The LENS is an excellent beginning and will be spread by all your readers to their circles and such. You are so effective in presenting the essence of MMT to the general public that it's important for all of your followers to not only inform their circles, but effort greatly to get you on national television news MSNBC.CNN etc.The essence of MMT presented directly and clearly to the general
public as you do so well ,could have a huge effect to support the enormous needs of this critical time in our history.A livable future for our grands and great grands is definitely on the line. Keep up your great work dear Doctor !!--Ron Sisk
Thanks for the nuanced insights from the inside.
Obviously the MMT you are promoting isn't accepted as legitimate by all.
I sent you an email sometime ago asking is MMT only possibly valid in the USA or can it be applied say in Africa or South America?
It would be nice to get an answer.
George, not trying to speak for Stephanie here, but your question is pretty deep and broad. This might be a good place to do some preliminary homework https://michael-hudson.com/2021/07/moving-beyond-dollar-hegemony/
Read the Deficit Myth - her book. It’s very accessible and basically yes - any government that issues it’s own currency and doesn’t peg it to anything- gold, another currency, can afford to do what the US, UK etc did during the pandemic- invent loads of money. Inflation is the limit and that only arrives when production is limited by capacity - ie full employment or scarce resources.
MMT is an analysis of currency, federal finance, monetary-bank operations, and macroeconomics.
MMT economists are adept at using this lens wherever there are any of those currently, historically, or prospectively at play.
What is true among these areas for some countries might be quite different in others eg does the country peg its currency, is there a national central bank, is there considerable debt owed to a foreign country, are there more than one industries/sectors in the economy, is the country at war or had been recently devastated by conflict, what are the state of resources available to the central government.
Certainly MMT analysis of one monetarily sovereign country is essentially true of all monetarily sovereign countries albeit differences in scope of economic industries/sectors, resources.
Monetarily sovereign countries are fundamentally characterised by floating their national money of account aka currency, not pegging the currency to a foreign currency or commodity (eg gold), and spending by fiat aka decree i.e. political will in govt. Some examples of monetarily sovereign countries are 🇺🇸, 🇯🇵, 🇨🇦, 🇨🇭, 🇨🇳, 🇦🇺, 🇬🇧
A few points Tom, if I understand you correctly maybe MMT works based on a number of variables in the economy in question. Do you have an equation you can share where these variables can be input and an answer comes out ?
Another point if I understand you correctly the government continues to print money until under MMT inflation takes off. Then the powers to be stop printing. That's like taking drugs away from an addict, what do you think will happen?
Re: your second point. Stephanie is on record many times now showing that the budget process can include offsets if necessry to proactively guard against and otherwise prevent problematic inflation pressures. But she has also said quite adamantly that offsets are usually not required because of ample fiscal policy space in the economy - in other words low problematic inflation risk. https://mobile.twitter.com/StephanieKelton/status/1367125555380969473
also:
https://www.nytimes.com/2021/04/07/opinion/biden-infrastructure-taxes.amp.html
Keep in mind the 🇺🇸 hasn’t seen any problematic inflation since the petroleum supply shocks of the 1970’s.
When you look at the spending during WWII that brought the country to full employment matched by maximum use of resources we can see there a precedent for how to spend while managing shortages & inflation risks.
MMT economists have said that the way currency issuing govt’s spend is by fiat - aka creating money into existence given the votes in eg congress. For example when govt wants to provision itself with labour/resources it spends its own national money of account (as granted to said govt by its constitution) into existence aka the economy - by instructing its bank eg Fed to deposit appropriations into the relevant accounts in the private sector. The study & analysis done by MMT economists that objectively shows this spending process as fact is spun by neoliberals into anti-MMT propaganda using language that triggers fear in the minds of us currency users in the non-govt sector eg “MMT advocates for limitless money PRINTING!! THEY’RE PRINTING MONEH! THEY’RE PRINTING MONEH!!”
I certainly would never equate govt fiscal policy used to serve the public purpose in any way to drug addiction. But I might equate that to neoliberal policies that drive cash flow to the wealthiest .01%.
Again the precedent is WWII where the govt (free from a domestic gold standard constraint) was able to spend for existential purposes and what followed was a middle class golden age due to winning war(obviously) and an appropriate size money supply to create demand and jobs (our economy runs on sales afterall) given govt deficit spending, without which we would’ve returned to a devastating recession.
This para, Tom.
"MMT economists have said that the way currency issuing govt’s spend is by fiat - aka creating money into existence given the votes in eg congress. For example when govt wants to provision itself with labour/resources it spends its own national money of account (as granted to said govt by its constitution) into existence aka the economy - by instructing its bank eg Fed to deposit appropriations into the relevant accounts in the private sector. ""
This is all FALSE. What is true is that this is what MMT economists SAY.
But it's false. And if you think about it for a Moment, then the problem is obvious.
There is NEVER a question of how government spends - there's money in the TGA account and they pay it out from that account and viola - my Social Security payment arrives tomorrow. Same for ALL government spending.
No mystery - but only half of the equation.
What is missing from this part of the discussion is from where does Guv get its income. The answer, despite Kelton's errant admonishment otherwise, is simple.
Government taxes incomes and government BORROWS.
Yes, taxes and Bond proceeds finance the government.
No surprise, really.
Every Penny of income and every penny of spending is reported and accounted.
https://fiscal.treasury.gov/reports-statements/financial-report/current-report.html
There's no mystery really, despite the MMT conflations in effort here.
There is NO PRINTING of money (there should be).
There is NO TELLING the Fed to Pay anything.
Please cite somebody's job to do so. LOL.
There is no money created by Budget votes in the Congress. NONE.
EVERY Bill that passes the Congress includes APPROPRIATIONS language.
Ever read the Constitution on APPROPRIATIONS ?
The Money can only and MUST be appropriated .... FROM THE TREASURY - meaning the money must be IN THE TREASURY first in order for it to be appropriated.
That's a biggie Kelton lie there.
Please tell her I said so, as she knows better.
You, Tom, are also repeating the MMT hogwash and misleading your followers.
And your abuse of the term "objectively' should be criminal .
There is no ANTI-MMT propaganda.
There is only monetary and fiscal truth and understanding that is standing in your way.
The Money Apprentice.
Money is a medium of exchange. If the currency issuer (our government) does not print money, there is not enough money for the economy to grow. Taxes does NOT pay for federal spending. FDR balanced his budget in 1937 to appease the Republicans, and guess what!! A depression followed in 1938. That is a pattern that has been seen again and again throughout history. The rich may not pay enough in taxes. That impacts income inequality. It boosts the stock market while the majority find their incomes purchase less. But where they really benefit is with all the government programs that feed them money, like the ACA, and military-industrial complex spending, private prisons. Those businesses are not entrepreneurial, they are not to be admired, they are government funded industries that give little benefit to the people.. Money cannot be finite. Assume for example, there are only 40 ounces of gold in the world and only 40 people in the world. Each person has ONE ounce of gold. What happens when the 10 children of each of the 20 couples the 40 people make grow up and want families of their own. How are they going to share those 40 pieces of gold so that everyone can purchased needed products and services?
Money is NOT finite and it can never be if we are all to survive and we should ALL SURVIVE.
What’s in the Treasury account is just bookkeeping.
You Libertarians need to learn the difference between the government sector and the private sector.
You said:
“The Money can only and MUST be appropriated .... FROM THE TREASURY - meaning the money must be IN THE TREASURY first in order for it to be appropriated.”
When 🇺🇸 govt passed Covid legislation was the money already in the GA ? No.
When FDR signed into law the New Deal & later funding for WWII legislation was the money already in the GA? Obviously no.
What’s criminal is the murder by proxy done by neoliberal, Libertarian policies of austerity born out of ignorance of failing to understand the difference between the government sector and the private sector. Is this the flavour of debate you want to have ? Out of respect for Prof Kelton I’m trying not to go there.
Tom,
Thanks so much again.
Good job you don’t know me or you would ignore my comments.
Been happening over a dozen years.
Ask Grumbine – who shut me out of RP a few years ago; Stephanie – who shut me out of NEP well before that, or Mosler, who shut me out of the Center of the Universe back in ’13 when I corrected him about Nixon’s “Gold-Window” canard. Later he sent an email : “technically, you’re correct.” LOL
I stand 100 percent behind EVERY comment I make.
I have to. And I don’t make any claims that can not be proven.
I’ll gladly get to the APPROPRIATIONS matter. That’s why I raised it.
But, Libertarian?
For the record – I am a radical progressive monetary revolutionary.
My politics are radically progressive (Green Party), and my goal is a Public Money Revolution …. With a pen.
And I never make any bones or apologies about that, no matter where I am.
Having said that and having studied the national monetary system under my Dad for over fifty years – yes, over 50 years – I will acknowledge that the first four or five of those years was in a deep study of Austrian Economics. I have all the key Austrian authors on my bookshelf. And I still rad them occasionally and subscribe to a half-dozen Austrian websites.
But it was me who taught my Dad of the errors of what you call Libertarianism.
He became a social Liberal- economic Conservative
I became a revolutionary. That’s why I’m here, trying to defeat MMT which is (central banking) Bankers Money School CAPITALism.
It’s why I worked hard as a Green Party Team Member to destroy MMT’s attempt to remove Public Money from our Platform back in ’18, from where it has been for over a decade.
You don’t seem to know who is a Libertarian, Tom.
Your leader – Warren Mosler.
https://www.youtube.com/watch?v=6WSQ20I1Jv4
Libertarian Warren Mosler - Keep Deficit and Eliminate Taxes (MMT for Conservatives Part 3)
For some reason, all the Post-K’s were fooled by Mosler’s ‘reserve adds and reserve drains’ instead of following the thoughts of their P-K leaders – …. Or PRINT THE MONEY. THEN
Tom: “”When US govt passed Covid legislation was the money already in the GA ? No.?”
Tom, I said it must be in the TGA before it can BE Appropriated, and spent.
It MUST be APPROPRIATED FROM the Treasury.
I didn’t say - to be in the TGA before legislated, that would be self-defeating.
On the COVID legislation ( Senate Bill 3548) have you read it?
The entire Appropriations Paragraph begins with these words :
EC. 1106. Direct appropriations.
(a) In general.—There is appropriated, OUT OF AMOUNTS IN THE TREASURY NOT OTHERWISE APPROPRIATED out of amounts in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2020, to remain available until September 30, 2021, ( MY EMPHASIS )
Like I said, it is in EVERY piece of legislation that requires spending. Just like that.
So, yeah, the money MUST be in the Treasury before Authorization and Appropriation can result in “spending”.
Read it and weep, Stephanie.
But I feel certain she knows this – being why she never spoke MMT to the Congress or Treasury.
Why not hold her accountable for this outcome ?
Tell her I said so. Ask for her comment. Something. Accountable.
LAST
“”What’s criminal is the murder by proxy done by neoliberal, Libertarian policies of austerity born out of ignorance of failing to understand the difference between the government sector and the private sector.””
WOW. Pure Grumbine.
While total-Grumbine, it really just shows WHO doesn’t know where the PRIVATE central-banking FRBS Bank falls. Ans. NOT in the Public Sector.
Also why TSY – CB Balance Sheet Consolidation between these sectors is a Moslerian Prank on y’all followers.
Steve Grumbine is a well-meaning but monetarily-ignorant Putz.
Uh-oh.
The Money Apprentice
It seems like you are looking for a deeper understanding of MMT. Your skepticism given what most econ majors and others are taught is understandable. I think you would enjoy reading "Modern Monetary Theory" by Wray. He has the equations you are looking for and much more. The MMT model of central bank finance is the correct one. However, as they admit, and as Kelton explains here, there is more to the economy than that.
There is no evidence that there is THE cause of inflation. That's old MF economics ala Milton Friedman. The evidence is overwhelming it's simply not true.
Inflation while it is not close to one of the major problems facing us, considering what the future potentially holds for future generations (nuclear war, global heating, destruction of habitats and ecosystems, etc.), can be a source of some economic friction. If the banking system creates too much credit given overall supply constraints, the type of systemic inflation that MMTers consider the most troublesome, the suggestion is to take reduce the monetary base by taxing or by having the USA government tax or buyu bonds.
As you rightly imply easier said than done given that the government is controlled by the super wealthy
As for your first point: “MMT works based on variables…”
MMT is strictly analysis. The analysis done by MMT economists is objectively true and factual aka working/works in explaining currency and its relation to govt finance, macroeconomics, monetary/bank operations.
So, can you re-word your question to very specific concerns/ideas about what you want to see as working in a monetary sovereign govt that could also work in a non-monetarily sovereign govt?
Now, I personally am in no way an expert on economic formulas but it seems that is of utmost importance to you. In that case you might present that question in a way not directed as a reply to me.
That said I’m familiar w/the basic sectoral balances equation that where there is a surplus on the govt sector side there must be a deficit on the non-govt sector side of the balance sheet, and conversely where there is a deficit on the govt side there must be a surplus on our side (public sector/foreign sector)
(I-S) + (G-T) +(X-M) = 0
Bill Mitchell, a leading MMT economist, writes often utilising formulas to further explain the subject and I would refer you to his website and countless articles eg:
http://bilbo.economicoutlook.net/blog/?p=32396
I believe she did answer when she said that any government that issues its own currency can never run out of money. The issuing government deals with inflation via taxation.
That's right, but I think according to MMT, the issuing Govt deals with the Economic problems of (1) Inflation & Deflation (2) If the Currency Issuing Govt has the human, material & technological resources for sale in it's own currency (3) Well I would add this: The fears the Public have about Govt Spending. Funny how they are not afraid of Bank Created money by the Credit Creation Process, which is a lot of money injected into the economy, mainly straight into Housing and Financial Assets.
Anything that is created be it MMT or something else has to take into account the thought process of the humans that use it.
So MMT would creat this foundation of free money controller by politicians who are suppose to do the right thing , put it into infrastructure.
Maybe but highly unlikely.
A politician main focus is to maintain power and he or she will do that by the means at his disposal.
You need to differentiate fiscal & monetary policy. Responsible democracies will not give politicians unfettered control over fiscal spending. The risks are corruption, pork barreling, and resource scarcity leading to unnecessary inflation. Monetary policy should always be in the hands of an independent central bank. Taxation and fiscal frugality are powerful anti-inflation tools, but politicians need to fine tune where the burden falls.
MMT is not for every democratic country because the risks are not sufficiently controlled by governance and engagement with the electorate. It works in Japan due to the homogeneity of the people. It works in China due to the subjugation of the people and industrial system. It may not work in democracies where powerful vested interests exercise extortionate influence over political decision makers. Like USA.
David thank you for so correctly stating the problem with MMT. You do it so much better then I. Your reference to China is on the mark I hope others read you comments and grasp your insight.
Governments (generally) issue their 'currency' - which is Bills and Coins.
In the US, the private Fed issues the Bills, and TSY issues the coins.
So, there's not enough 'coins' issued by Guv to fund government spending and thus, ALL GUVs need taxation and BORROWING to provide income for spending.
Or, they would run out of money. QUICK !!
While governments differ widely on the currency-issuing powers and prowess, no government on this Planet uses other than the (central) Bankers Money system, and thus any Guv must finance its spending using central banking monies.
This is an incontrovertible fact.
MMT is hyperbole cooked up in Opacity and shoe-horned into a non-existent public policy. FALSE.
The Money Apprentice.
“LOL” as you would say.
The Fed will swap paper dollars for reserves on a bank’s balance sheet when a bank foresees a demand for paper currency eg in the run up to Christmas or summer holidays. No big deal. And the bank can always swap paper $$ back for reserves into their reserve account. And further back in the process you will find paper dollars originate from the Treasury’s Bureau of Engraving and Printing.
You might want to throw out your Taft and Hoover era text books because we have a central bank now and a reserve system where settlement funds (reserves) are used to settle trillions in transactions everyday. As pointed out to you elsewhere on this page ALL profits from the Fed are remitted to the Treasury less expenses.
The Fed is a creature of congress and must follow / obey any laws passed by congress directed at itself. Further if the congress decided at some point to dissolve the Fed it could do with a law per the authority granted to the congress by the Constitution.
Quick Google searches bring up articles relating to the fact that the Fed must follow laws passed by congress, just as say the military branch would also have to follow laws passed by congress pertaining to it(military branches are also part of the government but retain some powers of independence within congressionally approved scope):
“The House approved the Fed Oversight Reform and Modernization Act in a 241 to 185 vote thanks to overwhelming Republican support.” https://mobile.reuters.com/article/amp/idUSKCN0T82HD20151119
“ To amend the Federal Reserve Act to increase monetary policy transparency and accountability and to make reforms to the Federal Reserve System, and for other purposes.” https://www.congress.gov/bill/115th-congress/house-bill/6741/text
“ The 115th Congress is considering a number of bills that would affect the Fed’s monetary policy, lender of last resort, and regulatory responsibilities. Although these bills contain numerous wide- ranging changes, most provisions can be grouped into five broad categories:” https://fas.org/sgp/crs/misc/R44848.pdf
“ McFadden Act of 1927
February 25, 1927
The Federal Reserve’s success led to this legislation, which President Calvin Coolidge signed into law in February 1927. The Act rechartered the Federal Reserve Banks in perpetuity, liberalized branch banking rules, and revised a wide range of laws related to the treatment of banks that were not members of the Federal Reserve System.” https://www.federalreservehistory.org/essays/mcfadden-act
“The Durbin amendment also known as Regulation II[1] is a provision of United States federal law, 15 U.S.C. § 1693o-2, 👉 that requires the Federal Reserve to limit fees charged to retailers for debit card processing. It was passed as part of the Dodd-Frank financial reform legislation in 2010, as a last-minute addition by Illinois Senator Richard Durbin, after whom the amendment is named.[2]” https://en.m.wikipedia.org/wiki/Durbin_amendment
Federal Reserve: somewhat private, somewhat independent, creature of congress that acts as an agent of the 🇺🇸 govt and is required to follow all directives by the congress passed into law.
An objective fact.
George, google "Fahdel Kaboub". Ploenty of writings, audio and video to be found. He specializes in applying an MMT understanding to countries that are resource poor and lack currency sovereignty. MMT is an understanding, not a regime.
Good advice. Ask Fadhel.
He and Joe Firestone led an MMT attempt to 'gut' the U.S. Green Party Platform of its Public Money Plank (Greening the Dollar).
You know, actually DOING what MMT claims they can do NOW.
A wide-ranging, free and open discussion ensued for over a month - (all of it available at greensformonetaryreform.org )
There were NINE amendments to the Platform proposed by MMT.
ALL were resoundingly defeated by the GPUS National Committee after open and candid debate. When was the last time you saw any of that with MMT?
I was proud to be a team Member officially defending the GPUS Platform from MMT's egregious and ignorant attacks.
Just a I am here.
The Money Apprentice
Thanks. It seems so clear to me. Why isn’t it to , for example, Larry Summers or Paul Krugman ? They’re no shlemiels.
They're from the neoclassical/neoliberal school which completely dominates mainstream econ. It is difficult to admit everything you've learned, taught, won Nobels for, is largely incorrect.
Yes, ‘don’t let the fact that essentially all your predictions are wrong put you off’ school of economics 😀
I do agree with that, BTW.
I disagree that Summers ain't a schlemiel. Total schlemiel.
Krugman ?
Ever seen the YT video where former monetary-Economist and Euro-Banker Bernard Lietaer reveals Krugman's tale of going to Princeton and telling them day-one that he wants to study the Money System.
Advisors say, do that, or else become an Economist, publish papers, become a professor, maybe have a chance at a Nobel. Your choice.
We know which way Krugman fell.
His inflation critique of MMT is way off the wall.
But even among the Post-Ks out there, not a lot of support for MMT.
Cause it ain't true.
The Money Apprentice
It's odd isn't it Steve? This is how I see it, a bit of a guess though on why people do this:
Intellectually understanding a theory of economics & winning a Noble Prize is a TOTALLY different skill set than the emotional upset of not only recognizing that part of one's work is based on basic mistakes or omissions, but then saying it Publicly to a Public which sneers at MMT. That would require a huge love of seeking Truth, and a faith that the Truth is always going to be for the best, such as creating freedom, no matter what.
Especially if someone is very emotionally attached to their very, very good reputation. That is not easy, and he may not even desire it, or have any faith that is a worthy path to seek & tell the truth.
Mosler: "Krugman is intellectually dishonest. I met him for dinner here on St. Croix several years ago and after several hours of discussion he fully understood it all, to the point where he interrupted me to better answer a question from his wife. We haven't spoken about it since..."
https://twitter.com/wbmosler/status/1101535500475817991
So sage, Dr. Kelton. Let's hope more people start reading you.
It's critical the citizenry learn the truth about our politicized and wrong headed fiscal policies relative to our currency. Republicans are much bigger liars about it than most democrats., especially "Progressive" democrats.
Stephanie is the very person with the understanding and will to show this reality to those who don't know, and show up those liars who do know, but wish to deny it to the rest of us.
Hey there Mac. May I comment on that, as we would likely have our goals aligned on MMT?
I'm not interested in having a partisan conversation about Parties, but about promoting the acceptance of MMT (& also Private Bank created Money, another topic).
Is your purpose the same on MMT?
If so, then please read on:
It is true that Republicans & Conservatives tend to be more distrusting & dismissive of MMT, and Progressives tend to easily be open to it. The former tends to value "Keeping what has value"/ "if it ain't broke don't fix it"; and the latter itends to be open to new ideas & also spending Govt Money.
But despite that, what I personally see as someone who listens to such people, is that one of the biggest reasons that they are dismissive of MMT is because it is popularly associated with Alexander Occasio Cortez (AOC), rather than Kelton or the rare Conservatives that promote MMT. I would also tend to feel the same way, she is not someone I trust either in some ways (though why is of no importance in this matter).
I also note that MOST of the time I hear Progressives talking about MMT and Conservatives are quoting it, MMT is being very much misrepresented and used to sell a sense of entitlement, or promote economic carelessness, rather than why MMT is a primarily accurate description (from which sensible policy flows) & useful for everyone (inc Conservatives who want lower Taxes).
I do not agree with your claim they "lie" about MMT or are bigger liars. They have a different world view & feelings about money different to mine. Some of them are not open to a rethink of economics & have firmly set feelings about money & what it should be.
They tend to understand that money is created out of keystrokes to some degree.
But if we treat MMT & money creation & destruction as a Partisan issue - as a lot of people do - I think they do the Public understanding of MMT a big disservice. Conservatives & Repbulicans actually could use the same understanding to lower taxes or Private health care bills; or fund Charter Schools better.
Thanks Stephanie. This is only indirectly related to this article you wrote here concerning Govt spent/created currency & infaltion fears , but what about Private Bank created money (Credit Creation Process when a private bank makes a loan)?
Professor Richard Werner deals with this. Why do MMTers not talk of this, or how much of each economy is made of of Bank Created Money??
Have you also read his book "Princes of the Yen"? I would love your view on it - it influenced me a lot. I think it explains the mistrust of Central Banks and thus MMT indirectly too by some people (not me, regarding the latter). It is basically about how his own work experience showed him that the Central Bank of Japan wanted to disempower the Treasury & it's own economy to fail for selfish reasons (it's own staff admitted this in private); and apparently some central banks like the ECB seem to be doing similar things.
Thanks
Lost in the glowing MMT cloak being drawn around fiscal reality here is the very real and lawful fact that only the declaration of a national emergency for the COVID Pandemic facilitated all this falsely-claimed MMT fiscal-finance (actually plain vanilla deficit-financing to pay for spending), being an emergency that suspended the debt-ceiling - among other things - an emergency that allowed some $5 or $6 Trillion in new debt to be rolled out un-challenged.
While it's uncertain when that 'emergency' law will change, Her Treasury Meister Yellin has already informed Congress that Treasury is implementing emergency measures to keep paying some Bills and not others until the end of the Fiscal year.
No Economic Emergency equals No Borrowing by the Guv.
And why should Guv borrow in the first place when the Constitution grants Congress the money creation and issuing powers now usurped by private Fed bankers - who create new money from nothing and lend it to that government ??
Why does MMT not support THAT debt-free self-financing option?
https://www.youtube.com/watch?v=2HRt6sSXpOQ
I guess we had to put our big girl dress on today and stop pretending there's any 'keystroking' to be had to pay for stuff - now it's just BORROW !, BORROW !! BORROW !!!.
Whatever happened to BONDS can not finance spending ? LOL.
Thanks, MMT, for nothing …. But ……. Perennial Debt and confusion.
Thanks, MMT, for nothing.
.
So, in other words, Dr. Kelton is faking that MMT has driven these 'emergency' outcomes of piling on the debt that must be repaid by taxing incomes, as it was rather the outcome of the Pandemic's economic emergency.
⤴️ FALSE
LOL.
Are you a bot, Joe? You talk like it.
Why don't you challenge something I said?
Admittedly I'm too old to know what a bot is.
But if they do talk like me, they must be monetary reformers.
The way you ricochet around, it's as if you don't want anyone to follow an argument in a way that can be understood. It's as if you're not writing in English to me. Granted, I'm not a trained economist, but as an example, the last sentence above doesn't seem to mean anything. "MMT has driven these 'emergency' outcomes of piling on the debt that must be repaid by taxing incomes, as it was rather the outcome of the Pandemic's economic emergency." Not only hard to read or interpret but just plain squirrelly. If you're not a bot, sorry for the implication, but it doesn't appear you want to be understood by normal people. It's not like Dr. Kelton has any control over institutions for her to "fake" anything. Nevermind. I'm sure it's all clear to you.
Dave, Thanks.
Please. No, don’t ‘never mind’ that.
It’s too valid I can see.
I apologize.
I just read that sentence you quoted and – it took a minute – but I am nodding in agreement with all those descriptors you applied, but also realize that the sentence NEEDS something beyond explanation to be understood. Correction.
More than a bad typist - writer fault to now realize that a tiny word had been omitted, and one that would, I hope, lead to a more clear understanding. I hope.
That omitted word was ‘if’, so maybe more consequential - and its use in that clause becomes “
, as if it was rather the outcome… ,
As if. And then in the context of ending my comment about public debt and MMT’s denial of the need for Borrowing to pay our Bills, which is patently false and easily provable, the sentence in total becomes…
. "MMT has driven these 'emergency' outcomes of piling on the debt that must be repaid by taxing incomes, as if it was rather the outcome of the Pandemic's economic emergency."
In further explanation and emphasis - on my quick reference to the people needing to pay these debts.
People. Businesses and corporations, if I may,
ALL of that public debt could not possibly be more real as a lawful financial obligation of our government and nation, and ALL of it MUST be repaid to its holders.
From the perspective of fiscal administration, the only valid source for income for the government to pay its debts in a debt-based money system is taxing the money from people’s incomes - and paying the people’s income tax money over to our government’s creditors.
When this chat takes center stage, the bankers are taxing our incomes using this public debt - being a further enrichment of themselves and their privileged others. The rich get richer. The poor get the picture. This is how they do it.
Maybe the government needs to take back the money system and the money power - the authority to issue our money debt-free into circulation, exactly as was publicly advocated by over 400 economists back when they mattered – in 1939. This was responding to such a proposal by Irving Fisher, Paul Douglas and other progressives
What matters is who issues the money – for politics. And how it is issued – for economics.
Thanks.
The Money Apprentice
Joe, get your accounting straight. Look at the Fed's balance sheet where cash and reserves are federal liabilities. So treasury sales are swapping govt treasury liabilities for govt central bank liabilities, not "borrowing" as you think; and federal revenue is redemption of govt liabilities, not transfer to govt of some third party's liabilities, not "funding" as you think. All federal spending is liability issuance, not asset recycling.
Thanks for what you think you know, Alan. All wrong as I will show.
Is my accounting reference .... crooked'? Or just wrong ? Which one? Say what is wrong, and correct THAT. With accounting RULES, reporting history and law.
Your attempt at shoe-horning MMT's "consolidation conflagration' into EITHER government or central bank accounting, or BOTH, is a fraud. And, fails.
FIRST, ""Look at the Fed's balance sheet where cash and reserves are federal liabilities.""
NOTHING about the Fed's Balance Sheet is either a 'federal' asset or liability.
When it comes to financial reporting and Balance Sheets, 'federal' is the national government.
The "Fed" (Federal Reserve Banking System) is a private BankCorporation Cartel - its ownership, Management and Profits go to finance itself and make profits for its private Member Banks. It can not report on the Treasury's liabilities.
That's the 'reporting Entity' part of the Accounting Rules.
Only the Treasury's Balance sheet lists "federal" assets and liabilities.
https://fiscal.treasury.gov/reports-statements/financial-report/balance-sheets.html
You will NOT find any Fed 'reserves' on there.
Read the NOTES to the audit included.
Read the important Note on the Fed's role of Fiscal Agent for this Entity.
SECOND _ " So treasury sales are swapping govt treasury liabilities for govt central bank liabilities, not "borrowing" as you think;"
As I think? May I show?
Nice try. More ignorant conflation - all provable. So, please DO hang in here.
Not "borrowing" ?
Treasury Issuance is not a borrowing?? LOL
31 U.S.C. § 3104 - U.S. Code - Unannotated Title 31. Money and Finance
§ 3104. Certificates of indebtedness and Treasury bills (a) The Secretary of the Treasury may BORROW on the credit of the United States Government amounts necessary for expenditures authorized by law. (my emphasis).....
Reach back and pull your head out.
Stop talking through your here, Alan.
The Fed is not an agency of the government, not owned or operated by the federal government, nor does the federal government "gain" from its operations - even though the Treasury pays for all of the Fed's Salaries and Rent and 3-hour Lunches - through chicanery. Let's talk about that.
You use the term "treasury sales' - as if there's only one flavor. To clarify for the open-minded reader.
1. When TREASURY sells its new Bonds, Notes, etc is one thing (as in T-31, ss 3104 qbove) - THAT is when government is funded. That is when the TREASURY is the Seller.
2. When TREASURIES - i.e. those same Treasury Notes, Bills, etc now held by banks and individuals are sold BY THE BANKS on the Fed Open-Market - then Alan, the TREASURY is not involved in the Transaction. There is NO REDEMPTION of anything.
THE FED runs the Open Market Account Sales, and the FED itself is the BUYER. To repeat, The HOLDER (bank) of the Treasury is the Seller. The Fed is the Buyer. The Fed pays with reserves to the Seller's Bank.
Conflation, conflagration, anecdote, meme, innuendo = monetary opacity ... - the currency of MMT.
Your last statement is too ignorant to grasp.
Spending of tax revenue is liability issuance by the government.
Heaven help us all to overcome real (Moslerian) monetary ignorance.
The Money Apprentice.
The Constitution creates a government comprising a legislature, a judiciary and an executive. One of the many executive agencies created by the legislature is the Fed.
The Fed honors payments authorised by the legislature and made by other parts of the executive by increasing its liabilities to payees’ banks which in turn increase their liabilities to payees, measured in dollars. The Fed’s liability to a bank decreases, and that bank’s liability to its customer decreases when the customer settles a requirement for revenue. Treasury instruments are term limited interest bearing federal debt. Fed reserves are termless interest bearing federal debt, exchangeable for federal bank notes which are termless non interest bearing federal debt.
Tokenistic Fed shareholdings and muddled nomenclature complicate the picture.
Hey Alan, Thanks. But -
"One of the many Executive Agencies created by the legislature is the Fed."
Really? Alan?
No.
Who told you that? MMT ?
Can you prove it?
Ever read the Fed Act where they make the Fed an Agency of government?
Neither has anyone else. I guess they forgot that detail.
I've even met people working for the Fed saying it's a government agency. It's in their own reports. Because they want YOU to think it's true,
LOL. I asked, directly, years ago, on their website.... Where is the Agency authorized by law? Nothing.
Please provide any evidence based in law or regulation that would make the Fed - a completely PRIVATE organization - an AGENCY of the government.
Is there ONE employee of the 12 Federal Reserve Banks that is a Public Employee? No. Yet we pay for their salaries.
And please lose the faux 'tokenistic' gesturing.
Or, show what I said has no value.
On another fake matter, as I have asked before, please show ANY EVIDENCE that the Fed follows the directive of the Congress to 'fund' any Program spending.
It does not exist. More MMT lies.
RATHER - the Congress can authorize its spending through "Authorizations Bills' and 'Appropriation Bills' but that has zero effect of putting money into the Treasury Account . The Treasury STILL and ALWAYS must come up with the dough. (Taxes and Bonds)
Are you unaware of the impending shutdown of government payments because they're broke ? Gawd, talk about unnecessarily going down with Mosler's Ferry.
Having endured this MMT engagement for about a dozen years now, there's nothing new in your confusing, misaligned statements lacking law, history or even logic. Whenever MMT gets to the end of its rope - Rinse and Repeat. Louder.
"Hey. Read MMT!" I already have. Everything except the textbook ($$)
APPROPRIATIONS - Constitution
Article I, Section 9, Clause 7:
No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.
Got that? Even the Congress is limited in its largesse over the Purse.
And it is the requirement for an Appropriation FROM THE TREASURY that accompanies every funding Bill in the Congress.
That means the money MUST be in the Treasury (account) first.
Let me know if you want any examples.
So all this 'Congress instructs and the Fed pays' is total B.S. - a conjuring of Mosler for the monetarily ignorant - which we all are naturally because the money system is not taught in any college or university in the country.
What a great LANE for the Moslerian-Libertarian juggernaut.
And all them Post-K liberals jumped right in.
Too bad, alan, that you and the other good people are drinking Mosler's KOOL-AID.
Finally, please.
I have provided links to the Government accounts and Reports.
NOWHERE in the government accounts or reports do you find C.B. reserves listed as interest-bearing ( an enigmatic logic is at play here) liability of the government, so why not bring Kelton, Wray, Fullwiler or Gray in here to argue these points, because, though well-stated in fiction, comments are all easily shown false by facts.
.
The Money Apprentice
Despite the annoying ad hominem flavours employed by Joe I would point out one simple fact that the Fed returns all of its profits to the treasury less expenses; something unheard of or in any way acceptable to a firm in the private sector:
“The attached chart illustrates the amount the Reserve Banks distributed to the U.S. Treasury from 2011 through 2020 (estimated).” https://www.federalreserve.gov/newsevents/pressreleases/other20210111a.htm
Joe, the US legislature created the Fed in 1913 when it passed the Federal Reserve Act. No Act, no Fed.
Hey Tom,
Thanks so much for 'choosing your poison' - to defend and mislead your favored MMT readers….. TRY.
Only thoroughly LENS-informed MMT idiots (a broad charge) don’t seem to know FROM WHERE the Fed Banks ACQUIRE ALL OF THEIR INCOME.
It’s from us – the U.S. taxpayers.
And, for the record – coming from someone who has studied Combined(consolidated) FRB Annual Reports for 30+ years, the Fed (FRBS) is not allowed to ‘make a profit’.
They operate as a (net-income) non-profit, and what they collect for ‘income’ is our payments of interest cost on the Bonds they hold.
Funny thing, eh, Tom?
The Fed Banks buy Treasuries through the FOMA …… for nothing.
We taxpayers pay interest to those Fed Banks just as if they were a Pension Fund.
That interest income is all of the actual income of the FR Banks.
Then we pay $Billions in Fed Salaries and Benefits at both the FR Banks and the FR BoGs, and the FOMC, etc, all their rents, and again three-hour lunches ( it is WE that pick up that tab)
Then we pay any of their Losses (Many Billions some years)
Then we pay the interest on the reserves(IOR) that the Member Banks pocket.
ALL OF THAT WITHOUT CONGRESSIONAL OVERSIGHT
and then AFTER ALL THAT IS PAID and deducted from FR Banks’ income,
The FR Banks return to us the NET INCOME, not the Profits, that is left over.
The Fed does not share their Profits.
The FED returns TO TREASURY a portion of the payments that OUR TREASURY has paid to those Banks.
True Story.
If you read the Fed Annual Reports, it’s all in there.
We pay the Bills.
They Pay nothing.
They give us back the change.
Only an MMTer could polish that socio-economic turd to make the Fed the good guys.
Pathetic.
The Money Apprentice.
It's funny that the interstate highway system is always cited as a good thing. They destroyed dozens of urban cores, displaced millions of people, poisoned the remaining population for generations, and set the course for what seems like irrevocable climate change. I can't think of a 20th century government expenditure with a worse track record.
In other words city-states deplete resources unsustainably and are an existential threat to human habitat and tribal cultures are not.
Trying to reign in a city-state juggernaut that is the 🇺🇸 to operate sustainably will require a miracle.
Read <i>Seeing Like a State</i> by James C. Scott for many such examples. The interstates are comparatively benign compared to the "villagizing" and "collectivizing" of Russian, Ukrainian, Tanzanian, etc. farms.
I'm a big fan Dr Kelton!! An 87 year old, double average citizen, who happened on to MMT about 3 years ago trying to better understand gov't budget,fiscal,monetary operations .Bottom line, MMT just makes so much common sense and needs to be introduced and promoted widely.The LENS is an excellent beginning and will be spread by all your readers to their circles and such. You are so effective in presenting the essence of MMT to the general public that it's important for all of your followers to not only inform their circles, but effort greatly to get you on national television news MSNBC.CNN etc.The essence of MMT presented directly and clearly to the general
public as you do so well ,could have a huge effect to support the enormous needs of this critical time in our history.A livable future for our grands and great grands is definitely on the line. Keep up your great work dear Doctor !!--Ron Sisk
Her Modern Monetary Theory book- The Deficit Myth, should be mailed to every person in Congress right now for required reading.