Caveat: the honesty of CBO reporting fluctuates based on appointments, etc. The current regime has already proven itself to be not very good. That is to say, overly partisan. So presuming no GDP growth this year is, well, I don’t have the words for such complete willful BS.
The problem, in turn, is exacerbated by establishment media that don’t care about proper framing or honesty. So we get a day or two of hysteria over the $31t number which does us absolutely no good. To the contrary: it benefits the pro-austerity crowd for whom austerity is the answer to everything.
The CBO is a joke in my opinion but I guess there are some people that are still slaves to whatever they say about the economy in their report. However, Warren Mosler was right about rate hikes in which so many economists have it backwards. It's funny that they don't realize that those rate hikes for which the federal government is paying interest income into the hands of those who are better off financially.
Let me preface my remarks by saying I think Stephanie is one of the brightest lights in the economics firmament. Having said that, I don't understand why she appears on Bloomberg and essentially spouts bromides.
Example: In asking her opinion about the accuracy of survey data, Stephanie replied (I'm paraphrasing a bit) "I don't know, you know, on a scale of 1 to 10, where I put myself on the worry scale." What?! What?! If you think the surveys are bullshit, then say so. If not, then express your confidence in them.
And on the debt ceiling crisis. Stephanie (in my view) correctly assessed that refusing to pay our bills would be catastrophic, and she made the interesting dichotomy between a WILLINGNESS to pay and an ABILITY to pay our bills. But then her interviewer seemed to imply that it wasn't a crisis at all, but just another wrestling match between Democrats and Republicans, the White House and Congress. At which point I was hoping Stephanie would reply: "No! It's a FUCKING NIGHTMARE if the debt ceiling isn't increased! Don't you understand that these MAGA Republicans want to bring down our democracy, and defaulting on our national debt is their last best chance of doing so?"
Now I understand that I don't have an academic career to worry about preserving, but I think Stephanie has been given a chance by the confluence of recent events to be a true American hero. I wish she would aggressively embrace that opportunity.
I trust that her comments weren’t meant to be self preserving though I agree she could have been more direct. As a strategist, I recommend continuous learning, pick the most impactful battles, and know geography. Dr. SK has expanded my understanding to use the MMT Lens to illuminate incredible possibilities that renewed my optimism in our nation. I’m grateful and will continue to advocate MMT strategically. If Stephanie appeared on The Daily Show, she may have used your suggested language or something more direct.
Amen. I absolutely share your respect and admiration for Stephanie. She is so smart, she's got the professional gravitas, and I apologize if I offend anyone by going old school, but Stephanie is not at all hard to look at as well. These qualities make her a perfect spokesperson for MMT. I just wish she would loosen up a bit. Maybe a couple of drinks before she goes in front of the camera...
I've stayed awake at night worried about my criticism of Stephanie's media appearances. Because she has the distinct advantages of not only being whip-smart but also being (in my opinion) right, I've been struggling with why I've found her media appearances to be less than satisfying. And maybe this is the answer. She has yet to employ the trick that every politician has pulled since the invention of the interview. Don't answer the question you've been asked (they're usually not at all interesting), but instead ANSWER THE QUESTION YOU WISH THEY WOULD ASK. If she does that, she will surely shine. And the nation will be better off for it.
I think we could go a long way towards solving the problems created by the "debt ceiling" by referring to it as the "savings ceiling," and asking the Republicans to explain their hatred of people and corporations wanting to park their hard-earned money in the safest, most secure place on the planet -- Treasuries.
Either public DEBT in fact IS an obligation of our government to repay any amount borrowed by a date certain - in ($US) money that can only be 'gained' by government through taxation of our citizens 'incomes', OR it is not that kind of legal obligation. And what kind is it?
Banker Mosler, with Dr. Kelton's concurrence, claims that the fact the Fed's record-keeping to track these borrowings ends up as 'just another FED accounting norm' means that the amounts OWED by the government are not really "DEBTS". The folly of perpetuating this Moslerian mythology should become apparent.
Any read of USC Title 31's various definitions of Government borrowing, via either Bills, Notes or Bonds, actually proves the fallacy of this mythology. The borrowing requires the issuance of Certificates of InDEBTedness. Although today most of that government borrowing happens 'electronically', by keystrokes, the record established and kept by the Fed shows EXACTLY to whom our government owes its Debt-Service Payments. So, why again, ain't that a DEBT?
What's the deal?
Lastly, WHY does MMT insist on separating the American citizens from our funding of government spending and borrowing, and, when the hammer falls, of re-paying, as lawfully required, the principal amount of the loans?
The only reason it's debt is because the plain old MONEY created is immediately transformed into debt by making it become treasuries. Just change the law. Keep it what it actually is A GIFT OF MONEY TO GOVERNMENTCONTRACTORS AND EMPLOYEES.
What everybody needs to wake up to is 1) the new monetary paradigm is GIFTING
2) that strategically implementing GIFTING into the Debt Only based system in the various ways I've posted here many times is not only the political football resolution to the ignorant and demagogic right's blather but
3) mathematically the end of inflation which is the biggest problem in economics
4) the freeing of the individual from enforced austerity,
5) the greatest boost to GDP in history
6) the opportunity to form the greatest political coalition the country has ever seen, which will enable the bulk of liberal reforms unrelated to money/economics to be enacted
7) Clear the way for the kind of fiscal "deficits" necesarry to upgrade the infrastructure and confront climate change
8) create a solid everyday individual opportunity and temporal universe reality to feel gratitude everytime you purchase something instead of grudging resentment toward business and government. Imagine an economy based on and evocative of grace as in Gifting.
And that's why the new monetary paradigm is a MEGA-paradigm of which there has only been 2 others in human history.
I have no idea what you’re talking about here. Do you ??
And, please, what does any of this have to do with MY comment? Please, any reference to something I said here ??
I have not read whatever you wrote here repeatedly, so these memes mean nothing to me. Sorry
And this …
“”The only reason it's debt is because the plain old MONEY created is immediately transformed into debt by making it become treasuries. “”
Wow ! First, I thought, in error I guess, that you understood that all money created BY BANKERS, MUST BE in the form of a DEBT, before it is entered into the account of the Borrower – where it first enters circulation as part of the nation’s money supply (M-1). It’s called ‘debt-BASED money’,
Or to Adair Turner ( an Uber central banker), called Debt-Contract Based Money.
BEFORE that ‘money’ can happen, the Borrower must sign the Promissory Note (Debt to Lender) to make all the (Debt-Service ) payments in the loan contract . THAT bank-money requires the DEBT as a pre-condition to making the loan and deposit, MEANS that everything you wrote there is a WAN, supported by neither proof nor logic.
And then, the Math. Although Treasury borrows a $TRILLION each year now in ordinary(*) times, that would only be less than 5 percent of the money put into circulation BY THE BANKERS that year, so the notion that the money issued becomes Debt “by making it become Treasuries” …. I mean, WOW!
"I have no idea what you’re talking about here. Do you ??"
Yes.
"what does any of this have to do with MY comment? "
1) It's obvious that you cannot think outside of the present monetary paraigm of Debt ONLY as the sole form and vehicle for the creation and distribution of new money.
2) Neither the Fed nor the Treasury are private banks, and other than to be a legalized handmaiden of the private banks and to obscure the private banks' monopolistic paradigm there is no actual necessity to immediately transform the money of the deficit into treasuries, i.e. debt.
Money as Debt as in a burden to repay is a concept. Monetary Gifting as in no necessity to repay is conceptually in complete opposition to the Debt ONLY concept. One of the signatures of historical paradigm changes is that they are always in complete conceptual opposition to the present paradigm.
Let's see if we can distinguish between bills, debts and deficits. Most people don't consider their monthly utility or phone bills to be "debts," I think primarily it's because there is no interest rate attached to them. They're bills, not debts--although there's no arguing that you owe that money. Now it's true that they do become debts if you're late and have to pay interest fees--your inability to pay on time has turned your bill into a debt that accrues interest. Let it go unpaid for too long and you're in trouble.
On the other hand, everyone agrees that your mortgage is a debt--you pay interest and principal on it every month. Now here's the key insight. Whether we're paying a bill or a debt, you and I are mere USERS of the currency issued by the federal gov't. Hopefully we have all the money needed to make all of our payments. If not, unhappiness, and perhaps personal bankruptcy, ensues. And there's no long-term future in counterfeiting.
But because the federal gov't issues our currency, it can always pay its bills. The US Treasury will NEVER bounce a check! But if the gov't spends more than it claws back in taxes in any given year, this creates a deficit. Question is, does this gov't deficit constitute a debt? And to whom? If the govt' owes this debt to itself, then it can simply issue more currency to pay back the "loan." In this crazy system, each year the Gov't could issue enough currency to cover last year's deficit and proceed ad infinitum, with the current year being the only one out of balance. Of course, this could only work until there was so much currency in the economy that inflation would run rampant and destroy the value of the dollar. Deficits can be wonderful, but only up to a point.
But this is not how most deficit hawks approach the issue. They believe the American people writ large owe this money, this DEBT, to their own gov't. Why? Because someone has to pay. You can't expect to get something for nothing! But when the gov't spends wisely, we always get something for something!
Here's what actually happens in our economy. When the gov't deficit spends, enormous wealth gets created. Roads, bridges, hospitals schools, power plants, housing, etc., etc., etc., are produced by the virtuous combination of human labor and natural resources made possible by the motivation to make money. Don't think of the "cost" of a brand-new tunnel linking New York and New Jersey in terms of dollars--assess its worth instead in terms of how much AVAILABLE labor and resources went into the project--and whether or not this was the best investment available at the time based on the short and long-term benefits, both economic and social.
Federal deficit spending is the source of our financial wealth. Where else could the dollars in your savings account could have come from? But too much deficit spending devalues the dollar, which makes the whole point of deficit spending a worthless enterprise. Moral of the story: Applaud deficit spending when it is used to employ labor and resources sitting on the sidelines to create more wealth for our society. And boo deficit spending when all it does is put more money in people's pockets but nothing more gets done.
Let’s see if we can distinguish between those evil deficit hawk Austerians and progressive public money advocates out for a cruise.
Yours is already – outta the gate – a false choice, as is Dr. Kelton’s MYTH.
She, Mosler and the MMT cadre present their own deficit myth.
NO OPTION BUT MORE BORROWING BY GOVERNMENT – to finance that deficit. Are they afraid of real, sovereign money issuance and administration ?
What did the P-Kers mean by 'Print the money' ?
How bout some plain old seigniorage gain by the government like what happened with Greenbacks ?
The Money Power.
Deficit spending was always a high policy mark for Post-Keynesians, already when Mosler came upon their scene and said something about the monetary system and re-directed the chat room. Reserve adds and reserve drains yadda yadda.
It has ALWAYS been P-K policy that government public policy actions should be financed via deficit spending.
That ain’t modern monetary theory,
It’s a purloined progressive policy.
But what’s the monetary theory here?.
So nobody on our team is against “deficit-spending”, Never have been. No way.
(I was at the MMT public intro - The Fiscal Sustainability Teach-In at GWU in April 2010 as MMT’s anti-Peterson Group’s HOLY SHIT TOO MUCH DEBT – WE NEED AUSTERITY NOW response. )
So there’s no finessing what a debt is (The Legal Aspect of Money H.A. Mann ….. ANY Edition).
All that borrowing, by law, is a DEBT. Lawfully a debt. Confusing missives about various IOUs don't really change that.
And yes, the ONLY source (today) for paying that Debt is taxes – so yeah Public Debt is a burden on both taxpayers and the national economy.
And the only viable alternative source of financing the deficits is publicly issued money.
The BS from Mosler and the Bankers involve their ACCEPTANCE and ADVOCACY for MORE PUBLIC DEBT, rather than the traditional P-K response of the day : We NEED government spending - Either Print the Money, or Borrow it . Every named P-Ker has said so.
Wha’ ‘appen??
No, for almost a hundred years, progressive monetary reformers have called out loud for the government to directly issue the money – all of it – like Greenbacks - without debt - and an end to government borrowing.
Glad you added this gem, Wally –
“”But because the federal gov't issues our currency, it can always pay its bills.””
So many dimensions.
How ‘bout this ?
In the national Money Statutes *Title 31 USC ….., so to say, AS BY LAW,
the term “currency” applies ONLY to the coins and paper that make up our Legal Tender money – so government issued.
Wally, does any MMTer THINK that the government “pays its Bills” with paper money ?
I suspect that exchanging views with you will just lead to frustration on both our parts as we talk past each other, but here goes. You write, "then maybe it's all a confidence trick." Well, of course it is! As the great economist Hyman Minsky quipped: "Anyone can create money. The Trick is having it accepted." I wonder if Richard Nixon, who took us off the gold standard in 1971, saw the James Bond movie "Goldfinger" (1964, I think) and suddenly realized what a fetish it was to peg the value of the US dollar to a shiny, soft yellow metal that was only valuable because other people--including Auric Goldfinger--said it was valuable.
If you have been employed in the U.S., I'm guessing that the Human Resources Department of any company you've worked for has never given you the option of being paid in euros or yen or renminbi. No, you assumed you'd be paid in US dollars. Why? Because the federal gov't can do horrible things to you if you don't pay your taxes, and the only form of payment the IRS will accept is--you guessed it--the US dollar.
So the need to pay your taxes in dollars makes you covet that currency, and the knowledge that over 100 million other Americans are under the same constraint gives you confidence that enough of those dollars will be clawed back in taxes to preserve the purchasing power of the currency. How can you be sure about this? Well, by going to the grocery store, of course! When you see that the price of milk and hot dogs has remained more or less steady, your confidence in the Treasury/Federal Reserve's handling of economic matters is confirmed.
Now it's true that covid has temporarily fucked things up--think of the price of gas and eggs (although avian flu appears to playing a role--in the high price of eggs, not gas). But it seems to me it's incumbent on you to explain how a pre-pandemic so-called "national debt" of $28 trillion could have produced inflation and interest rates below 2%. I await your answer.
Well, if you can handle the truth, a discourse here could also lead to greater monetary understanding, on your part.
I mentioned that I was attending the MMT anti-Peterson Group “Fiscal Sustainability Teach-In" in April 2010 at GWU.
Where were you with MMT n April 2010 ??
I had a few years dealing with the MMTers well BEFORE that date and I have been a student of the monetary system for 40 years BEFORE THAT.
The sad news for you Wally is that you can’t tell me anything about ‘money’ systems that I don’t already know. I challenge you to do so.
I am an ecological-economy aware (student of Dr. F. Soddy, it’s founder, and a corresponding friend of Dr. Herman Daly, the study’s modern-day leader until his recent passing ) – a radical progressive activist, Green Party Member – the real 180 from the Deficit Hawks. In the flesh.
That’s why I’m here.
And, on money and on ecology, you ?
To begin, two or three things from your first paragraph,
First, on that ‘confidence trick’ meme, MY POINT was that Mosler has convinced you all that the ‘currency issuer’ is actually the ‘money-issuer’, when in reality the money issuer is , EVERYWHERE, the PRIVATE global central banking system (opposite of government) , here made person in the Fed.
The Fed banks create 95 percent of the money in circulation through bank-lending and issues 99 percent, or so, of the money in circulation. Only the “coins” are government-issued currency.
So think on this, Wally. Please. For one moment.
Are those COINS what we use to pay taxes ?
NO ! We pay taxes with PRIVATE bank-credit ISSUED by the Fed Banks.
NOT with government issued money.
And so, I describe this MMT sleight-of-hand transference of THE MONEY POWER into, nominally, the power of the CURRENCY, as a confidence trick.
Why else would MMT’s money meme be measured as ‘currency’?
And you respond – “Well, of course it is!” a confidence trick.
And then you move into another Randy Wray meme on Minsky.
On issuance versus acceptance. All false, BTW.
I reply first that I’ve never seen that meme in Minsky-print.
Not saying it’s false.
More important – MMT has completely missed Dr. Minsky’s epic and most prophetic research paper while at Levy.
It’s a vid of my talk at the American Monetary Institute(AMI) reform conference, I think five years ago, on Dr. Minsky’s Working Paper No. 127 – titled “Financial Instability and the Decline(?) of Banking : Public Policy Implications" Levy economics Institute . April 1994.
Then lastly, Wally, this comment - for which I was forced to correct Mosler on his Center of the Universe VLOG back in ’09.
“I wonder if Richard Nixon, who took us off the gold standard in 1971,......”
Wally, Nixon DID NOT take us off the gold-standard in 1971.
FDR took us off the gold-standard in 1933 – 1934.
Completely for EVERY transaction in our domestic US economy.
Mosler denied this ‘correction’ for several days of VLOG exchange but finally sent me an email – very brief.
“Technically, you’re correct.”
Ten years later in ’44 the Bretton Woods conferees adopted an international currency-exchange value with relation to the $US, and the $US valued at a fixed gold price.
When the bankers screwed the deal, meaning creating debts denominated in $US that they wanted to exchange for diminishing gold supplies, Nixon bailed.
But that only affected ‘international business transactions’, and not the US economy.
All the rest of what you wrote is pretty minor and I will not respond to your interpretations of your own observations. For now.
Joe, I'm going to give you the best piece of free advice you've ever received. You wrote: "...you can't tell me anything about 'money' systems that I don't already know." If you ever want to be taken seriously, never write those words again. I'm done.
Joe, I'm with you in so many respects. Minsky? Yes via listening to every one of Steve Keen's videos for the last 10 years. Stephen Zarlenga? Yes, bought and read the book, and yes whoever controls the money system controls the nation. I even agree that MMT has some definitional and hence communication problems with their policies and presentation...but its a progressive reform, so lets not pick at it so much as find a way for it to integrate with the rest of the reforms and theorists.
All of Minsky, Keen, MMTers, Hudson, Graeber, UBI advocates, Public Banking want the same things. So how do you consolidate and integrate their reforms? You awaken to the new operant paradigm concept and how it is best applied. But you have to start analyzing on the paradigmatic level in order to do that. That is the missing link in the chain that will win the day for progressive economists and reforms. New paradigms change the nature of ENTIRE PATTERNS and resolve the major problems of the present/old paradigm. Lets do that.
Steve, You may disagree with everything I've written on this site--and you may be right--but I have attempted in my own ham-fisted way to write in plain English. For the life of me I don't understand a word of what you're trying to say. If you think you have something profound to say, then say it plainly. I'm not suggesting that you don't have something important to add to the conversation, but your post gives me no guidance. If you do have a keen insight, I don't want to miss out because I can't decipher your difficult prose. Please help me out by writing in the simple words I can understand. Thanks, Wally
No, FDR did not take us off the gold-standard! Maybe Mosler should have studied a little more Keynes. The US did like every other country fighting in WW1 had already done during the war. They stopped the convertibility of their currencies to a precious metal within their borders during WW1 in order to save it for trade under the advice of Keynes to the UK government. Their currencies value was still fixed to a precious metal due to export-import trade. By the end of WW1 the US had acquired 2/3 of the worlds gold which allowed the US to be the King maker at the Treaty of Versailles and Bretton Woods. By the end of WW1 every country except the US was indebted to the UK and the US (they were all bankrupt except the US). The UK was highly indebted to the US. Bretton Woods in simple terms fixed other countries currency values to the US dollar which was fixed to gold and could be converted to gold. The US was now the reserve currency of the world. The US was the primary exporter to war ravaged countries following WW2. By the late 60s and early 1970s the UK and Europe had largely been rebuilt, and the UK began to call the US bluff on the convertibility of Gold (asking for gold). It was then that Nixion and the US decided to repeal the Bretton Woods system (do away with the Gold Standard for good).
Your claim to some "vast knowledge of money" is driven by an ideology that's hell bent on making money a private sector commodity instead of what it is, a "Government Utility" that's sole purpose is to mobilize resources (build shit). If it wasn't already obvious that it's complete non-sense before the 2008 GFC and COVID 19 pandemic it should be obvious now. This is all about the struggle to place capital at the top of the economic pyramid that goes all the way back to Adam Smith. It's a tool used to constrain Democracy by Oligarchy. Mosler may not have everything correct (nobody does) but a lot of seems obvious he does. The Macroeconomic textbook written by Mitchell, Wray and Watts is primarily based on Keynes General Theory and others (paraphrasing, don't remember the quote in the text). Anyone who has studied Keynes knows his understanding and involvement in currencies, money, fixed exchange and the banking system during a critical time in history during WW1 and WW2 is unmatched by any one-person regardless of if it was nearly 80 years ago.
I didn't see any comment from you when Dr. Kelton posted Greenspan's testimony to the US congress (Paul Ryan) regarding US solvency regarding SSI. Greenspan said, "there's nothing to prevent the Federal Government from creating as much money as it want's!" He didn't say banks! It's a no brainer that the banks do the physical work in the same way they send my money to a car dealers bank account when I buy a car. Either Greenspan was lying under oath, or you have twisted yourself in a knot attempting to justify an ideology.
That's more like what I was looking for by my audacity.
But, for the record, and to repeat, I never made any 'claim to some "vast knowledge of money" ' (hyperbole) ; rather stated that one MMTer, in one instance proven by his 3 errors in his opening paragraph - could not teach me anything about the MONETARY SYSTEM - true for every MMTer I ever met - because they all learned 'money' from a libertarian banker- using balance sheet accounting instead of money-science and history. Y'all are fooled..... but still good people.
So, thanks for this MMT challenge on what I had written( I hope) .
Then, like most MMTers, your reply here is filled with a grain of truth, conflated with a litany of made up hyperbole, irrelevant anecdote and complete fabrication on critical issues, a.k.a., near-BS. Since we're calling names.
And then, friendly suggestion, if you think Warren took things too easy on me , please ask him to join us in this conversation. I would welcome that.
I will only reply regarding your WWI and FDR gold conflations, and also address and ask what ideology it is you think I represent in opposing MMT. (??)
First, the grain of truth - being that during WWI , the US suspended gold-currency convertibility - actually for the reasons you gave, but that War ended, and after Versailles we went back to a $US gold-exchange standard. Fully. 100 percent.
That leaves about an addition dozen years before FDR acted to abolish the gold standard for ALL US economy transactions. Why would you try to prove me wrong on something so obvious, Rick ? Drinking the Mosler Kool-Aid?
""On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. The United States had been on a gold standard since 1879, except for an embargo on gold exports during World War I, but bank failures during the Great Depression of the 1930s frightened the public into hoarding gold, making the policy untenable.""
While that is taken from the History Channel's Gold Standard page, it is cited almost verbatim in a Fed History post. Let me know if you want a citation.
The Gold-Money Score : Joe and Monetary Reform (1). Mosler, Rick and MMT (0 ).
Any counter-evidence ?
Rick : "Your claim to some "vast knowledge of money" is driven by an ideology that's hell bent on making money a private sector commodity" ...yadda yadda. LOL
Rick, by your writing I would assume you are a good reader, so, WTF is this about?
"making money a private sector commodity" ???? Ideologically we're Greenbackers.
Randy Wray said he never herd of Debt-free money, so he never herd of Greenbacks.
Since well before the GFC I was a leader of America's monetary reform movement, advocating to END this central banking fiasco which I completely understand. We at the Kettle Pond Institute had a website 'Economicstability.Org' where we welcomed every money-science advocacy from Hayek to Marx and including Keynes (whose tiny Tract on Monetary Reform remains my fave) and made a bunch of YouTube videos that you might like, except those related to MMT.
All that ended around 2013 or so, when my Kettle Pond partner Pete Young found my technological mis-steps too much of a burden. That was fine.
But, since what I advocate for - all my life - is what MMT falsely claims is already the situation - (permanent) debt-free public money creation and issuance of all US money by the government.
Like Greenbacks - if that needs re-stating - there's ZERO basis for your charges.
Stop pretending that MMT will fail from the right. Nothing there, in either case.
Again, MMT ain't progressive at all, despite its partnership with the money-ignorant Post-Keynesians.
I helped organize, was a Founding Board Member and for almost four years chaired the Legislative Action Committee of the Alliance for Just Money (monetaryalliance.org).
It's that monetary justice that is in my blood.
I know, I know, I'm closing.
But your question about Greenspan - I've answered it a dozen times.
Greenspan is an idiot, and Steve Croft another money ignorant scribe.
Like this.
If the government can issue all the money it wants at any time, then, pray Goddess, why did we need to pass the Greenbacks Legal tender Statutes Money Laws(1861 - 1864) BEFORE we could print and issue that currency ? Get it ?
Gotta pass the LAW to enable it ..... Greenspan knew that .... but Croft didn't.
I took a quick look at the CBO's Projections. Quick. The consistent increase in interest shown in the projection seems questionable - as there is an expectation interest rates will come back down in future years. Are their interest projections questionable ??
They project flattening, down to 2.5%, no? Shows you someone in operations at the FED knows MMT, amazingly, probably a staffer who owns bonds. Their target inflation rate is about 2%. This will get it. The most regressive way, as Mosler keeps saying, trickle-down, but it'll still get them the inflation they actively want. MMT has one half the battle. The next half is to show them how to get inflation with zero interest rates, something they know not how to do, and in fact cannot do. It's a role for Congress, fiscal, not the FED.
I should say, a "projection" of the FFR is not really a projection. The FOMC set the rate by voting. It's discretionary. Why? Because the USA operates a floating exchange rate and non-convertible currency, so the interest rate is not set endogenously, it is endogenous - choice of the government (the FED is a branch of government, with premises owned by private bankers, and a board appointed by private bankers. But they work for government. Kind of like Congress, congresspeople are not appointed by Congress).
What do you think the effects will be of Lael Brainard's move from the Fed to lead the White House economic team? With more and more jobs hitting the street in the coming years from the Infrastucture Bill, the Chips Act and the Inflation Reduction Act how does anyone think the labor market is going to shrink? How is inflation going to accelerate with insulin cost capped at $35/mo for seniors and out-of-pocket expenses capped at $2000/yr? Do any of these 'experts' do math any more?
Sure. They do very good totally inapplicable math (DSGE modelling). Check out Steve Keen's lectures.
With on-going CPI numbers the Federal deficit is probably currently a *real* surplus, so that's contractionary, and should stop the rise in employment. All regressive. Moving neoliberal economics chairs around central government is likely not going to do anything much. But hey, Biden promised "Nothing fundamental will change." War being a racket certainly did not change. "Promises made, promises kept"?
Nikki Haley proposed a cognition test for people over 75. Being 82, I'm a bit insulted by that but I do believe some testing is called for. I propose an economic competency test developed by Stephanie for all politicians. They have to pass the test before being allowed to vote on any economic issues.
Nice read, but troubling! It's like the policy officials have it all backwards. Way out of supply-shock led recession is to take the inflation hit, go to ZIRP (which is deflationary biased), and employ people, not unemploy them. How does unemployment solve a supply problem? It can't, makes it worse.
Also Stephanie, please mention the Federal Government *nominal* deficit has to be inflation adjusted, so currently it is (probably, year-to-date) a *real* surplus, which is contractionary. That might be what the FOMC wants, perversely, but the nominal deficit also fuels the neoclassical inflation hysterics, absurdly, because a real government surplus is deflationary.
On this column I agree because CBO projections are static. They assume linearity and never take into account incentives that change behaviors.
CBO estimated that Trumps tax rate cuts would increase the deficit due to lower tax revenue collections. The deficit is indeed higher but not because tax revenues have declined. Federal tax revenues continue to set new record highs. The deficit is growing not because of declining tax revenues but due to endlessly growing federal spending.
But it's okay. MMT tells us deficits don't matter. And if they don't matter, I'll ask again - why do any of us need to pay federal taxes?
The government is monetarily sovereign. So the only two reasons anyone actually needs to pay taxes (under the current monetary paradigm) are
a) inflation could become a bigger problem than it already is and
b) without taxation the government would have no effective means of controlling and directing commercial and wealthy individual agents. In other words the economic system would be more chaotic and unethical than it already is.
But this is why the 50% Discount/Rebate policy at the point of retail sale is paradigm changing all by itself. Because it ends any possibility of inflation FOREVER. Why? Because retail sale being universally participated in BY EVERY INDIVIDUAL AGENT makes it the single macro-economic point for policy IN THE ENTIRE ECONOMIC PROCESS.
Consider this as well:
1) We've never had 50% y/o/y inflation let alone moment to moment 50% inflation
2) If you study hyperinflations its apparent that they are very rare because 3-4 disastrous things need to occur before they happen like going to war, losing the war, having the winning side impose onnerous debts upon you and then having the private banking system leverage up currency speculators who short the currency and thats what kicks in the hyperness. So hyperinflations are easily avoided actually...if you have half a brain, even a modicum of ethics and you simply do not lawfully allow an anti-social act like the private banks leveraging up greedy asshole's who would create the hardship of hyperinflation.
3) As b) above shows taxation IS necessary and a legitimate right of government, but the high taxes we currently pay could be greatly reduced if we eliminated inflation with the policies of the new monetary paradigm. This makes the policies of the new paradigm politically integrative which as we see now is urgently needed.
4) A 50% Discount/Rebate policy at retail sale transforms almost universally harmful erosive inflation into universally beneficial deflation. The cardinal signatures of historical paradigm changes are:
1) They are always in complete conceptual opposition to the old/current paradigm
2) They totally invert the temporal universe reality of the old/current paradigm
3) They resolve the major problems of the old/current paradigm, and
4) If its a mega-paradigm change its beneficial effects spill over into areas other than the primary pattern the new paradigm applies to.
It's not government's job to control the behavior of the wealthy. It is government's job to adhere to the Constitution and provide broad, limited , and fair regulation. Sovereignties where very high and broad prosperity has been achieved such as Switzerland and British Hong Kong prove that governments do not to need to be intrusive.
Hyperinflations are not essential for monetary & credit busts and economic recession. But hyperinflation, and periods of high non-hyperinflation, have occurred far more often than you know. Monetary-driven economic busts are sadly too frequent. Germany, Venezuela, Argentina, Hungary, Zimbabwe, Yugoslavia - all experienced hyperinflation within the past century.
Current monetary & fiscal policy are both a mess. The cost on interest is already soaring with rising rates. The Dollar strengthened last year as we led on rate hikes but it has begun to weaken again. Federal spending proposals over the next few years will amplify the problem. Unless we begin to tackle the problem with sound economic principles, we are just passing down weakening prosperity.
In the new monetary paradigm not only will arbitrary inflater corportions be taxed at a rate of 100% on any revenue they may gain from such anti-social action, but they and their employees will be taxed to fund the new eco/climate bonds created to confront those problems. These new payroll taxes will total at least 50% of what the corporation and their employees paid for welfare, unemployment insurance and social security and which were eliminated by the policies of the new monetary paradigm.
Such inflating corporations' management personnel will also not be eligible for the personal and corporate tax reductions also enabled by the policies of the new paradigm, and they will also lose any gifted revenue (a 1-2% gift of net income for not inflating).
The concept behind the new monetary paradigm is an aspect of grace, namely Gifting/a Gift, which concept has always been the concept behind every historical paradigm change. And the taxation policies above are also based on an aspect of grace as in sovereignty as in absolute power that is redeemed by its desire to both serve the common good and to inhibit/punish irresponsible behavior that would destabilize same.
The whole concept of "free" markets is flawed because in the human universe there is only freedom within known and enforced barriers. That's why you can't walk into a theater and yell, Fire!
In today's modern oligopolistic corporate conglomerates and branding there is scant to no competition and no effective barrier to inflation. Hence "free" market theory is actually an enforcement of the present chaotic reality. Sovereign redeemed power by the government in its constitutionally granted power of taxation will effectively end that present fact and deal with agents who would abuse with it.
That idea would be the end of private enterprise, innovation, and abundance. Instead, your ideas are the worn out prescription of communism, the surest way to create scarcity & misery. It's failed everywhere it's been attempted. There is no new monetary paradigm - there are only proposals to reattempt failed ideas by people who don't know history.
1) doubling individual demand by reducing the price of everything at retail by half (and yet the enterprise still receives their full best competitive price with the rebate), and
2) which potentially doubles the demand for every enterprise's goods and services which is the definition of "good economic times" and
3) ends any possibility of inflation becuase retail sale is the terminal ending point of the entire economic process where production exits the economy and becomes consumption and
4) enables us to cut taxes of all kinds (for those who abide by the new graciously beneficial policies of the new paradigm)...is "the end of private enterprise, innovation, and abundance." ???
The fact is it is the end of the rule of advanced Finance Capitalism and the rejuvenation of the very profit making economic system you imagine is or should exist, by resolving its major problems and by imbuing it with what it majorly lacks, namely an unassailable ethic of graciousness.
Keith, I'm sure you mean well, but you need to look past your orthodox mind filters and keep looking at the above temporal universe economic policy effects until you are able to see them...instead of just reacting to them.
Inflation still hot, consumer spending still strong on the gusher of printed money they've been given by Santa's elves at Treasury. 'Transient' is becoming as legendary as 'if you like your plan you can keep your plan'. MMT isn't solving anything, it's exacerbating problems.
Neither you affirming the means of dominating the general populace and all other commercial agents except those that are already monopolies (austerity), nor MMT's failure to realize that reforms, even good reforms like MMT, within "free" market theory will never effectively deal with inflation. "Free" market theory is fantasy. It should rather be called Monetary and Financially Dominated Chaos Theory.
We are at the point where nothing except a new paradigm will effectively resolve our economic problems. THAT MUST BE COGNITED ON BY ECONOMISTS. Ptolemaic economics REQUIRES Copernican economics. All of the perfectly legitimate reductive analysis is simply not up to the task. It REQUIRES finding the SPECIFIC single, operant concept AKA paradigmatic analysis and the most workable and problem solving means of its application.
Brilliant guys like Steve Keen says exactly the above...and then immediately drops the idea and gets on to ANOTHER problem, the negative effects on energy caused by unchecked climate change, which changing the monetary and financial paradigm will enable the kind of mega projects needed to deal with that problem.
For chrissake lets put the horse back in front of the cart.
Caveat: the honesty of CBO reporting fluctuates based on appointments, etc. The current regime has already proven itself to be not very good. That is to say, overly partisan. So presuming no GDP growth this year is, well, I don’t have the words for such complete willful BS.
The problem, in turn, is exacerbated by establishment media that don’t care about proper framing or honesty. So we get a day or two of hysteria over the $31t number which does us absolutely no good. To the contrary: it benefits the pro-austerity crowd for whom austerity is the answer to everything.
The CBO is a joke in my opinion but I guess there are some people that are still slaves to whatever they say about the economy in their report. However, Warren Mosler was right about rate hikes in which so many economists have it backwards. It's funny that they don't realize that those rate hikes for which the federal government is paying interest income into the hands of those who are better off financially.
Let me preface my remarks by saying I think Stephanie is one of the brightest lights in the economics firmament. Having said that, I don't understand why she appears on Bloomberg and essentially spouts bromides.
Example: In asking her opinion about the accuracy of survey data, Stephanie replied (I'm paraphrasing a bit) "I don't know, you know, on a scale of 1 to 10, where I put myself on the worry scale." What?! What?! If you think the surveys are bullshit, then say so. If not, then express your confidence in them.
And on the debt ceiling crisis. Stephanie (in my view) correctly assessed that refusing to pay our bills would be catastrophic, and she made the interesting dichotomy between a WILLINGNESS to pay and an ABILITY to pay our bills. But then her interviewer seemed to imply that it wasn't a crisis at all, but just another wrestling match between Democrats and Republicans, the White House and Congress. At which point I was hoping Stephanie would reply: "No! It's a FUCKING NIGHTMARE if the debt ceiling isn't increased! Don't you understand that these MAGA Republicans want to bring down our democracy, and defaulting on our national debt is their last best chance of doing so?"
Now I understand that I don't have an academic career to worry about preserving, but I think Stephanie has been given a chance by the confluence of recent events to be a true American hero. I wish she would aggressively embrace that opportunity.
I trust that her comments weren’t meant to be self preserving though I agree she could have been more direct. As a strategist, I recommend continuous learning, pick the most impactful battles, and know geography. Dr. SK has expanded my understanding to use the MMT Lens to illuminate incredible possibilities that renewed my optimism in our nation. I’m grateful and will continue to advocate MMT strategically. If Stephanie appeared on The Daily Show, she may have used your suggested language or something more direct.
Amen. I absolutely share your respect and admiration for Stephanie. She is so smart, she's got the professional gravitas, and I apologize if I offend anyone by going old school, but Stephanie is not at all hard to look at as well. These qualities make her a perfect spokesperson for MMT. I just wish she would loosen up a bit. Maybe a couple of drinks before she goes in front of the camera...
I've stayed awake at night worried about my criticism of Stephanie's media appearances. Because she has the distinct advantages of not only being whip-smart but also being (in my opinion) right, I've been struggling with why I've found her media appearances to be less than satisfying. And maybe this is the answer. She has yet to employ the trick that every politician has pulled since the invention of the interview. Don't answer the question you've been asked (they're usually not at all interesting), but instead ANSWER THE QUESTION YOU WISH THEY WOULD ASK. If she does that, she will surely shine. And the nation will be better off for it.
I think we could go a long way towards solving the problems created by the "debt ceiling" by referring to it as the "savings ceiling," and asking the Republicans to explain their hatred of people and corporations wanting to park their hard-earned money in the safest, most secure place on the planet -- Treasuries.
What becomes here apparent is the mythology gap.
Either public DEBT in fact IS an obligation of our government to repay any amount borrowed by a date certain - in ($US) money that can only be 'gained' by government through taxation of our citizens 'incomes', OR it is not that kind of legal obligation. And what kind is it?
Banker Mosler, with Dr. Kelton's concurrence, claims that the fact the Fed's record-keeping to track these borrowings ends up as 'just another FED accounting norm' means that the amounts OWED by the government are not really "DEBTS". The folly of perpetuating this Moslerian mythology should become apparent.
Any read of USC Title 31's various definitions of Government borrowing, via either Bills, Notes or Bonds, actually proves the fallacy of this mythology. The borrowing requires the issuance of Certificates of InDEBTedness. Although today most of that government borrowing happens 'electronically', by keystrokes, the record established and kept by the Fed shows EXACTLY to whom our government owes its Debt-Service Payments. So, why again, ain't that a DEBT?
What's the deal?
Lastly, WHY does MMT insist on separating the American citizens from our funding of government spending and borrowing, and, when the hammer falls, of re-paying, as lawfully required, the principal amount of the loans?
Why?
Thanks.
The Money Apprentice
The only reason it's debt is because the plain old MONEY created is immediately transformed into debt by making it become treasuries. Just change the law. Keep it what it actually is A GIFT OF MONEY TO GOVERNMENTCONTRACTORS AND EMPLOYEES.
What everybody needs to wake up to is 1) the new monetary paradigm is GIFTING
2) that strategically implementing GIFTING into the Debt Only based system in the various ways I've posted here many times is not only the political football resolution to the ignorant and demagogic right's blather but
3) mathematically the end of inflation which is the biggest problem in economics
4) the freeing of the individual from enforced austerity,
5) the greatest boost to GDP in history
6) the opportunity to form the greatest political coalition the country has ever seen, which will enable the bulk of liberal reforms unrelated to money/economics to be enacted
7) Clear the way for the kind of fiscal "deficits" necesarry to upgrade the infrastructure and confront climate change
8) create a solid everyday individual opportunity and temporal universe reality to feel gratitude everytime you purchase something instead of grudging resentment toward business and government. Imagine an economy based on and evocative of grace as in Gifting.
And that's why the new monetary paradigm is a MEGA-paradigm of which there has only been 2 others in human history.
Steve
I have no idea what you’re talking about here. Do you ??
And, please, what does any of this have to do with MY comment? Please, any reference to something I said here ??
I have not read whatever you wrote here repeatedly, so these memes mean nothing to me. Sorry
And this …
“”The only reason it's debt is because the plain old MONEY created is immediately transformed into debt by making it become treasuries. “”
Wow ! First, I thought, in error I guess, that you understood that all money created BY BANKERS, MUST BE in the form of a DEBT, before it is entered into the account of the Borrower – where it first enters circulation as part of the nation’s money supply (M-1). It’s called ‘debt-BASED money’,
Or to Adair Turner ( an Uber central banker), called Debt-Contract Based Money.
BEFORE that ‘money’ can happen, the Borrower must sign the Promissory Note (Debt to Lender) to make all the (Debt-Service ) payments in the loan contract . THAT bank-money requires the DEBT as a pre-condition to making the loan and deposit, MEANS that everything you wrote there is a WAN, supported by neither proof nor logic.
And then, the Math. Although Treasury borrows a $TRILLION each year now in ordinary(*) times, that would only be less than 5 percent of the money put into circulation BY THE BANKERS that year, so the notion that the money issued becomes Debt “by making it become Treasuries” …. I mean, WOW!
(*) Neither Crisis nor Pandemic)
Thanks.
The Money Apprentice
"I have no idea what you’re talking about here. Do you ??"
Yes.
"what does any of this have to do with MY comment? "
1) It's obvious that you cannot think outside of the present monetary paraigm of Debt ONLY as the sole form and vehicle for the creation and distribution of new money.
2) Neither the Fed nor the Treasury are private banks, and other than to be a legalized handmaiden of the private banks and to obscure the private banks' monopolistic paradigm there is no actual necessity to immediately transform the money of the deficit into treasuries, i.e. debt.
Money as Debt as in a burden to repay is a concept. Monetary Gifting as in no necessity to repay is conceptually in complete opposition to the Debt ONLY concept. One of the signatures of historical paradigm changes is that they are always in complete conceptual opposition to the present paradigm.
Great effort Steve but some people don’t realize they are the paradigm. I recommend to move on. Take care sir.
Let's see if we can distinguish between bills, debts and deficits. Most people don't consider their monthly utility or phone bills to be "debts," I think primarily it's because there is no interest rate attached to them. They're bills, not debts--although there's no arguing that you owe that money. Now it's true that they do become debts if you're late and have to pay interest fees--your inability to pay on time has turned your bill into a debt that accrues interest. Let it go unpaid for too long and you're in trouble.
On the other hand, everyone agrees that your mortgage is a debt--you pay interest and principal on it every month. Now here's the key insight. Whether we're paying a bill or a debt, you and I are mere USERS of the currency issued by the federal gov't. Hopefully we have all the money needed to make all of our payments. If not, unhappiness, and perhaps personal bankruptcy, ensues. And there's no long-term future in counterfeiting.
But because the federal gov't issues our currency, it can always pay its bills. The US Treasury will NEVER bounce a check! But if the gov't spends more than it claws back in taxes in any given year, this creates a deficit. Question is, does this gov't deficit constitute a debt? And to whom? If the govt' owes this debt to itself, then it can simply issue more currency to pay back the "loan." In this crazy system, each year the Gov't could issue enough currency to cover last year's deficit and proceed ad infinitum, with the current year being the only one out of balance. Of course, this could only work until there was so much currency in the economy that inflation would run rampant and destroy the value of the dollar. Deficits can be wonderful, but only up to a point.
But this is not how most deficit hawks approach the issue. They believe the American people writ large owe this money, this DEBT, to their own gov't. Why? Because someone has to pay. You can't expect to get something for nothing! But when the gov't spends wisely, we always get something for something!
Here's what actually happens in our economy. When the gov't deficit spends, enormous wealth gets created. Roads, bridges, hospitals schools, power plants, housing, etc., etc., etc., are produced by the virtuous combination of human labor and natural resources made possible by the motivation to make money. Don't think of the "cost" of a brand-new tunnel linking New York and New Jersey in terms of dollars--assess its worth instead in terms of how much AVAILABLE labor and resources went into the project--and whether or not this was the best investment available at the time based on the short and long-term benefits, both economic and social.
Federal deficit spending is the source of our financial wealth. Where else could the dollars in your savings account could have come from? But too much deficit spending devalues the dollar, which makes the whole point of deficit spending a worthless enterprise. Moral of the story: Applaud deficit spending when it is used to employ labor and resources sitting on the sidelines to create more wealth for our society. And boo deficit spending when all it does is put more money in people's pockets but nothing more gets done.
Also, yay taxes, since they give our currency value.
Hey Wally Grigo,
Let’s see if we can distinguish between those evil deficit hawk Austerians and progressive public money advocates out for a cruise.
Yours is already – outta the gate – a false choice, as is Dr. Kelton’s MYTH.
She, Mosler and the MMT cadre present their own deficit myth.
NO OPTION BUT MORE BORROWING BY GOVERNMENT – to finance that deficit. Are they afraid of real, sovereign money issuance and administration ?
What did the P-Kers mean by 'Print the money' ?
How bout some plain old seigniorage gain by the government like what happened with Greenbacks ?
The Money Power.
Deficit spending was always a high policy mark for Post-Keynesians, already when Mosler came upon their scene and said something about the monetary system and re-directed the chat room. Reserve adds and reserve drains yadda yadda.
It has ALWAYS been P-K policy that government public policy actions should be financed via deficit spending.
That ain’t modern monetary theory,
It’s a purloined progressive policy.
But what’s the monetary theory here?.
So nobody on our team is against “deficit-spending”, Never have been. No way.
(I was at the MMT public intro - The Fiscal Sustainability Teach-In at GWU in April 2010 as MMT’s anti-Peterson Group’s HOLY SHIT TOO MUCH DEBT – WE NEED AUSTERITY NOW response. )
So there’s no finessing what a debt is (The Legal Aspect of Money H.A. Mann ….. ANY Edition).
All that borrowing, by law, is a DEBT. Lawfully a debt. Confusing missives about various IOUs don't really change that.
And yes, the ONLY source (today) for paying that Debt is taxes – so yeah Public Debt is a burden on both taxpayers and the national economy.
And the only viable alternative source of financing the deficits is publicly issued money.
https://www.congress.gov/bill/112th-congress/house-bill/2990/text
For real. Not as another MMT myth.
The BS from Mosler and the Bankers involve their ACCEPTANCE and ADVOCACY for MORE PUBLIC DEBT, rather than the traditional P-K response of the day : We NEED government spending - Either Print the Money, or Borrow it . Every named P-Ker has said so.
Wha’ ‘appen??
No, for almost a hundred years, progressive monetary reformers have called out loud for the government to directly issue the money – all of it – like Greenbacks - without debt - and an end to government borrowing.
Glad you added this gem, Wally –
“”But because the federal gov't issues our currency, it can always pay its bills.””
So many dimensions.
How ‘bout this ?
In the national Money Statutes *Title 31 USC ….., so to say, AS BY LAW,
the term “currency” applies ONLY to the coins and paper that make up our Legal Tender money – so government issued.
Wally, does any MMTer THINK that the government “pays its Bills” with paper money ?
If not, then maybe it’s all a confidence trick.
The Money Apprentice
I suspect that exchanging views with you will just lead to frustration on both our parts as we talk past each other, but here goes. You write, "then maybe it's all a confidence trick." Well, of course it is! As the great economist Hyman Minsky quipped: "Anyone can create money. The Trick is having it accepted." I wonder if Richard Nixon, who took us off the gold standard in 1971, saw the James Bond movie "Goldfinger" (1964, I think) and suddenly realized what a fetish it was to peg the value of the US dollar to a shiny, soft yellow metal that was only valuable because other people--including Auric Goldfinger--said it was valuable.
If you have been employed in the U.S., I'm guessing that the Human Resources Department of any company you've worked for has never given you the option of being paid in euros or yen or renminbi. No, you assumed you'd be paid in US dollars. Why? Because the federal gov't can do horrible things to you if you don't pay your taxes, and the only form of payment the IRS will accept is--you guessed it--the US dollar.
So the need to pay your taxes in dollars makes you covet that currency, and the knowledge that over 100 million other Americans are under the same constraint gives you confidence that enough of those dollars will be clawed back in taxes to preserve the purchasing power of the currency. How can you be sure about this? Well, by going to the grocery store, of course! When you see that the price of milk and hot dogs has remained more or less steady, your confidence in the Treasury/Federal Reserve's handling of economic matters is confirmed.
Now it's true that covid has temporarily fucked things up--think of the price of gas and eggs (although avian flu appears to playing a role--in the high price of eggs, not gas). But it seems to me it's incumbent on you to explain how a pre-pandemic so-called "national debt" of $28 trillion could have produced inflation and interest rates below 2%. I await your answer.
Hey Wally,
Well, if you can handle the truth, a discourse here could also lead to greater monetary understanding, on your part.
I mentioned that I was attending the MMT anti-Peterson Group “Fiscal Sustainability Teach-In" in April 2010 at GWU.
Where were you with MMT n April 2010 ??
I had a few years dealing with the MMTers well BEFORE that date and I have been a student of the monetary system for 40 years BEFORE THAT.
The sad news for you Wally is that you can’t tell me anything about ‘money’ systems that I don’t already know. I challenge you to do so.
I am an ecological-economy aware (student of Dr. F. Soddy, it’s founder, and a corresponding friend of Dr. Herman Daly, the study’s modern-day leader until his recent passing ) – a radical progressive activist, Green Party Member – the real 180 from the Deficit Hawks. In the flesh.
That’s why I’m here.
And, on money and on ecology, you ?
To begin, two or three things from your first paragraph,
First, on that ‘confidence trick’ meme, MY POINT was that Mosler has convinced you all that the ‘currency issuer’ is actually the ‘money-issuer’, when in reality the money issuer is , EVERYWHERE, the PRIVATE global central banking system (opposite of government) , here made person in the Fed.
The Fed banks create 95 percent of the money in circulation through bank-lending and issues 99 percent, or so, of the money in circulation. Only the “coins” are government-issued currency.
So think on this, Wally. Please. For one moment.
Are those COINS what we use to pay taxes ?
NO ! We pay taxes with PRIVATE bank-credit ISSUED by the Fed Banks.
NOT with government issued money.
And so, I describe this MMT sleight-of-hand transference of THE MONEY POWER into, nominally, the power of the CURRENCY, as a confidence trick.
Why else would MMT’s money meme be measured as ‘currency’?
And you respond – “Well, of course it is!” a confidence trick.
And then you move into another Randy Wray meme on Minsky.
On issuance versus acceptance. All false, BTW.
I reply first that I’ve never seen that meme in Minsky-print.
Not saying it’s false.
More important – MMT has completely missed Dr. Minsky’s epic and most prophetic research paper while at Levy.
Watch this if you dare, Wally.
https://www.youtube.com/watch?v=JwyPmENzBQ4
It’s a vid of my talk at the American Monetary Institute(AMI) reform conference, I think five years ago, on Dr. Minsky’s Working Paper No. 127 – titled “Financial Instability and the Decline(?) of Banking : Public Policy Implications" Levy economics Institute . April 1994.
Then lastly, Wally, this comment - for which I was forced to correct Mosler on his Center of the Universe VLOG back in ’09.
“I wonder if Richard Nixon, who took us off the gold standard in 1971,......”
Wally, Nixon DID NOT take us off the gold-standard in 1971.
FDR took us off the gold-standard in 1933 – 1934.
Completely for EVERY transaction in our domestic US economy.
Mosler denied this ‘correction’ for several days of VLOG exchange but finally sent me an email – very brief.
“Technically, you’re correct.”
Ten years later in ’44 the Bretton Woods conferees adopted an international currency-exchange value with relation to the $US, and the $US valued at a fixed gold price.
When the bankers screwed the deal, meaning creating debts denominated in $US that they wanted to exchange for diminishing gold supplies, Nixon bailed.
But that only affected ‘international business transactions’, and not the US economy.
All the rest of what you wrote is pretty minor and I will not respond to your interpretations of your own observations. For now.
But regardless, Good luck, Wally.
The Money Apprentice
Joe, I'm going to give you the best piece of free advice you've ever received. You wrote: "...you can't tell me anything about 'money' systems that I don't already know." If you ever want to be taken seriously, never write those words again. I'm done.
OK, Wally.
Thanks for the advice.
Appreciated.
I was actually hoping to spark the opposite reaction - full frontal assault.
And a larger learning opportunity.
Done with that.
The Money Apprentice.
Joe, I'm with you in so many respects. Minsky? Yes via listening to every one of Steve Keen's videos for the last 10 years. Stephen Zarlenga? Yes, bought and read the book, and yes whoever controls the money system controls the nation. I even agree that MMT has some definitional and hence communication problems with their policies and presentation...but its a progressive reform, so lets not pick at it so much as find a way for it to integrate with the rest of the reforms and theorists.
All of Minsky, Keen, MMTers, Hudson, Graeber, UBI advocates, Public Banking want the same things. So how do you consolidate and integrate their reforms? You awaken to the new operant paradigm concept and how it is best applied. But you have to start analyzing on the paradigmatic level in order to do that. That is the missing link in the chain that will win the day for progressive economists and reforms. New paradigms change the nature of ENTIRE PATTERNS and resolve the major problems of the present/old paradigm. Lets do that.
Steve, You may disagree with everything I've written on this site--and you may be right--but I have attempted in my own ham-fisted way to write in plain English. For the life of me I don't understand a word of what you're trying to say. If you think you have something profound to say, then say it plainly. I'm not suggesting that you don't have something important to add to the conversation, but your post gives me no guidance. If you do have a keen insight, I don't want to miss out because I can't decipher your difficult prose. Please help me out by writing in the simple words I can understand. Thanks, Wally
No, FDR did not take us off the gold-standard! Maybe Mosler should have studied a little more Keynes. The US did like every other country fighting in WW1 had already done during the war. They stopped the convertibility of their currencies to a precious metal within their borders during WW1 in order to save it for trade under the advice of Keynes to the UK government. Their currencies value was still fixed to a precious metal due to export-import trade. By the end of WW1 the US had acquired 2/3 of the worlds gold which allowed the US to be the King maker at the Treaty of Versailles and Bretton Woods. By the end of WW1 every country except the US was indebted to the UK and the US (they were all bankrupt except the US). The UK was highly indebted to the US. Bretton Woods in simple terms fixed other countries currency values to the US dollar which was fixed to gold and could be converted to gold. The US was now the reserve currency of the world. The US was the primary exporter to war ravaged countries following WW2. By the late 60s and early 1970s the UK and Europe had largely been rebuilt, and the UK began to call the US bluff on the convertibility of Gold (asking for gold). It was then that Nixion and the US decided to repeal the Bretton Woods system (do away with the Gold Standard for good).
Your claim to some "vast knowledge of money" is driven by an ideology that's hell bent on making money a private sector commodity instead of what it is, a "Government Utility" that's sole purpose is to mobilize resources (build shit). If it wasn't already obvious that it's complete non-sense before the 2008 GFC and COVID 19 pandemic it should be obvious now. This is all about the struggle to place capital at the top of the economic pyramid that goes all the way back to Adam Smith. It's a tool used to constrain Democracy by Oligarchy. Mosler may not have everything correct (nobody does) but a lot of seems obvious he does. The Macroeconomic textbook written by Mitchell, Wray and Watts is primarily based on Keynes General Theory and others (paraphrasing, don't remember the quote in the text). Anyone who has studied Keynes knows his understanding and involvement in currencies, money, fixed exchange and the banking system during a critical time in history during WW1 and WW2 is unmatched by any one-person regardless of if it was nearly 80 years ago.
I didn't see any comment from you when Dr. Kelton posted Greenspan's testimony to the US congress (Paul Ryan) regarding US solvency regarding SSI. Greenspan said, "there's nothing to prevent the Federal Government from creating as much money as it want's!" He didn't say banks! It's a no brainer that the banks do the physical work in the same way they send my money to a car dealers bank account when I buy a car. Either Greenspan was lying under oath, or you have twisted yourself in a knot attempting to justify an ideology.
Hey Rick,
That's more like what I was looking for by my audacity.
But, for the record, and to repeat, I never made any 'claim to some "vast knowledge of money" ' (hyperbole) ; rather stated that one MMTer, in one instance proven by his 3 errors in his opening paragraph - could not teach me anything about the MONETARY SYSTEM - true for every MMTer I ever met - because they all learned 'money' from a libertarian banker- using balance sheet accounting instead of money-science and history. Y'all are fooled..... but still good people.
So, thanks for this MMT challenge on what I had written( I hope) .
Then, like most MMTers, your reply here is filled with a grain of truth, conflated with a litany of made up hyperbole, irrelevant anecdote and complete fabrication on critical issues, a.k.a., near-BS. Since we're calling names.
And then, friendly suggestion, if you think Warren took things too easy on me , please ask him to join us in this conversation. I would welcome that.
I will only reply regarding your WWI and FDR gold conflations, and also address and ask what ideology it is you think I represent in opposing MMT. (??)
First, the grain of truth - being that during WWI , the US suspended gold-currency convertibility - actually for the reasons you gave, but that War ended, and after Versailles we went back to a $US gold-exchange standard. Fully. 100 percent.
That leaves about an addition dozen years before FDR acted to abolish the gold standard for ALL US economy transactions. Why would you try to prove me wrong on something so obvious, Rick ? Drinking the Mosler Kool-Aid?
""On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. The United States had been on a gold standard since 1879, except for an embargo on gold exports during World War I, but bank failures during the Great Depression of the 1930s frightened the public into hoarding gold, making the policy untenable.""
While that is taken from the History Channel's Gold Standard page, it is cited almost verbatim in a Fed History post. Let me know if you want a citation.
The Gold-Money Score : Joe and Monetary Reform (1). Mosler, Rick and MMT (0 ).
Any counter-evidence ?
Rick : "Your claim to some "vast knowledge of money" is driven by an ideology that's hell bent on making money a private sector commodity" ...yadda yadda. LOL
Rick, by your writing I would assume you are a good reader, so, WTF is this about?
"making money a private sector commodity" ???? Ideologically we're Greenbackers.
Randy Wray said he never herd of Debt-free money, so he never herd of Greenbacks.
Since well before the GFC I was a leader of America's monetary reform movement, advocating to END this central banking fiasco which I completely understand. We at the Kettle Pond Institute had a website 'Economicstability.Org' where we welcomed every money-science advocacy from Hayek to Marx and including Keynes (whose tiny Tract on Monetary Reform remains my fave) and made a bunch of YouTube videos that you might like, except those related to MMT.
https://www.youtube.com/user/economicstability/videos
All that ended around 2013 or so, when my Kettle Pond partner Pete Young found my technological mis-steps too much of a burden. That was fine.
But, since what I advocate for - all my life - is what MMT falsely claims is already the situation - (permanent) debt-free public money creation and issuance of all US money by the government.
Like Greenbacks - if that needs re-stating - there's ZERO basis for your charges.
Stop pretending that MMT will fail from the right. Nothing there, in either case.
Again, MMT ain't progressive at all, despite its partnership with the money-ignorant Post-Keynesians.
I helped organize, was a Founding Board Member and for almost four years chaired the Legislative Action Committee of the Alliance for Just Money (monetaryalliance.org).
It's that monetary justice that is in my blood.
I know, I know, I'm closing.
But your question about Greenspan - I've answered it a dozen times.
Greenspan is an idiot, and Steve Croft another money ignorant scribe.
Like this.
If the government can issue all the money it wants at any time, then, pray Goddess, why did we need to pass the Greenbacks Legal tender Statutes Money Laws(1861 - 1864) BEFORE we could print and issue that currency ? Get it ?
Gotta pass the LAW to enable it ..... Greenspan knew that .... but Croft didn't.
https://www.congress.gov/bill/112th-congress/house-bill/2990/text
THEN, we too can have government money.
All the best.
And thanks again.
The Money Apprentice
I took a quick look at the CBO's Projections. Quick. The consistent increase in interest shown in the projection seems questionable - as there is an expectation interest rates will come back down in future years. Are their interest projections questionable ??
They project flattening, down to 2.5%, no? Shows you someone in operations at the FED knows MMT, amazingly, probably a staffer who owns bonds. Their target inflation rate is about 2%. This will get it. The most regressive way, as Mosler keeps saying, trickle-down, but it'll still get them the inflation they actively want. MMT has one half the battle. The next half is to show them how to get inflation with zero interest rates, something they know not how to do, and in fact cannot do. It's a role for Congress, fiscal, not the FED.
(😅 that was embarrassing) * "...won half the battle..."
I should say, a "projection" of the FFR is not really a projection. The FOMC set the rate by voting. It's discretionary. Why? Because the USA operates a floating exchange rate and non-convertible currency, so the interest rate is not set endogenously, it is endogenous - choice of the government (the FED is a branch of government, with premises owned by private bankers, and a board appointed by private bankers. But they work for government. Kind of like Congress, congresspeople are not appointed by Congress).
What do you think the effects will be of Lael Brainard's move from the Fed to lead the White House economic team? With more and more jobs hitting the street in the coming years from the Infrastucture Bill, the Chips Act and the Inflation Reduction Act how does anyone think the labor market is going to shrink? How is inflation going to accelerate with insulin cost capped at $35/mo for seniors and out-of-pocket expenses capped at $2000/yr? Do any of these 'experts' do math any more?
Sure. They do very good totally inapplicable math (DSGE modelling). Check out Steve Keen's lectures.
With on-going CPI numbers the Federal deficit is probably currently a *real* surplus, so that's contractionary, and should stop the rise in employment. All regressive. Moving neoliberal economics chairs around central government is likely not going to do anything much. But hey, Biden promised "Nothing fundamental will change." War being a racket certainly did not change. "Promises made, promises kept"?
Nikki Haley proposed a cognition test for people over 75. Being 82, I'm a bit insulted by that but I do believe some testing is called for. I propose an economic competency test developed by Stephanie for all politicians. They have to pass the test before being allowed to vote on any economic issues.
Nice read, but troubling! It's like the policy officials have it all backwards. Way out of supply-shock led recession is to take the inflation hit, go to ZIRP (which is deflationary biased), and employ people, not unemploy them. How does unemployment solve a supply problem? It can't, makes it worse.
Also Stephanie, please mention the Federal Government *nominal* deficit has to be inflation adjusted, so currently it is (probably, year-to-date) a *real* surplus, which is contractionary. That might be what the FOMC wants, perversely, but the nominal deficit also fuels the neoclassical inflation hysterics, absurdly, because a real government surplus is deflationary.
On this column I agree because CBO projections are static. They assume linearity and never take into account incentives that change behaviors.
CBO estimated that Trumps tax rate cuts would increase the deficit due to lower tax revenue collections. The deficit is indeed higher but not because tax revenues have declined. Federal tax revenues continue to set new record highs. The deficit is growing not because of declining tax revenues but due to endlessly growing federal spending.
But it's okay. MMT tells us deficits don't matter. And if they don't matter, I'll ask again - why do any of us need to pay federal taxes?
The government is monetarily sovereign. So the only two reasons anyone actually needs to pay taxes (under the current monetary paradigm) are
a) inflation could become a bigger problem than it already is and
b) without taxation the government would have no effective means of controlling and directing commercial and wealthy individual agents. In other words the economic system would be more chaotic and unethical than it already is.
But this is why the 50% Discount/Rebate policy at the point of retail sale is paradigm changing all by itself. Because it ends any possibility of inflation FOREVER. Why? Because retail sale being universally participated in BY EVERY INDIVIDUAL AGENT makes it the single macro-economic point for policy IN THE ENTIRE ECONOMIC PROCESS.
Consider this as well:
1) We've never had 50% y/o/y inflation let alone moment to moment 50% inflation
2) If you study hyperinflations its apparent that they are very rare because 3-4 disastrous things need to occur before they happen like going to war, losing the war, having the winning side impose onnerous debts upon you and then having the private banking system leverage up currency speculators who short the currency and thats what kicks in the hyperness. So hyperinflations are easily avoided actually...if you have half a brain, even a modicum of ethics and you simply do not lawfully allow an anti-social act like the private banks leveraging up greedy asshole's who would create the hardship of hyperinflation.
3) As b) above shows taxation IS necessary and a legitimate right of government, but the high taxes we currently pay could be greatly reduced if we eliminated inflation with the policies of the new monetary paradigm. This makes the policies of the new paradigm politically integrative which as we see now is urgently needed.
4) A 50% Discount/Rebate policy at retail sale transforms almost universally harmful erosive inflation into universally beneficial deflation. The cardinal signatures of historical paradigm changes are:
1) They are always in complete conceptual opposition to the old/current paradigm
2) They totally invert the temporal universe reality of the old/current paradigm
3) They resolve the major problems of the old/current paradigm, and
4) If its a mega-paradigm change its beneficial effects spill over into areas other than the primary pattern the new paradigm applies to.
It's not government's job to control the behavior of the wealthy. It is government's job to adhere to the Constitution and provide broad, limited , and fair regulation. Sovereignties where very high and broad prosperity has been achieved such as Switzerland and British Hong Kong prove that governments do not to need to be intrusive.
Hyperinflations are not essential for monetary & credit busts and economic recession. But hyperinflation, and periods of high non-hyperinflation, have occurred far more often than you know. Monetary-driven economic busts are sadly too frequent. Germany, Venezuela, Argentina, Hungary, Zimbabwe, Yugoslavia - all experienced hyperinflation within the past century.
Current monetary & fiscal policy are both a mess. The cost on interest is already soaring with rising rates. The Dollar strengthened last year as we led on rate hikes but it has begun to weaken again. Federal spending proposals over the next few years will amplify the problem. Unless we begin to tackle the problem with sound economic principles, we are just passing down weakening prosperity.
Here is a new post to my blog wisdomicsblog.com
In the new monetary paradigm not only will arbitrary inflater corportions be taxed at a rate of 100% on any revenue they may gain from such anti-social action, but they and their employees will be taxed to fund the new eco/climate bonds created to confront those problems. These new payroll taxes will total at least 50% of what the corporation and their employees paid for welfare, unemployment insurance and social security and which were eliminated by the policies of the new monetary paradigm.
Such inflating corporations' management personnel will also not be eligible for the personal and corporate tax reductions also enabled by the policies of the new paradigm, and they will also lose any gifted revenue (a 1-2% gift of net income for not inflating).
The concept behind the new monetary paradigm is an aspect of grace, namely Gifting/a Gift, which concept has always been the concept behind every historical paradigm change. And the taxation policies above are also based on an aspect of grace as in sovereignty as in absolute power that is redeemed by its desire to both serve the common good and to inhibit/punish irresponsible behavior that would destabilize same.
The whole concept of "free" markets is flawed because in the human universe there is only freedom within known and enforced barriers. That's why you can't walk into a theater and yell, Fire!
In today's modern oligopolistic corporate conglomerates and branding there is scant to no competition and no effective barrier to inflation. Hence "free" market theory is actually an enforcement of the present chaotic reality. Sovereign redeemed power by the government in its constitutionally granted power of taxation will effectively end that present fact and deal with agents who would abuse with it.
That idea would be the end of private enterprise, innovation, and abundance. Instead, your ideas are the worn out prescription of communism, the surest way to create scarcity & misery. It's failed everywhere it's been attempted. There is no new monetary paradigm - there are only proposals to reattempt failed ideas by people who don't know history.
HAHAHA! Please explain how:
1) doubling individual demand by reducing the price of everything at retail by half (and yet the enterprise still receives their full best competitive price with the rebate), and
2) which potentially doubles the demand for every enterprise's goods and services which is the definition of "good economic times" and
3) ends any possibility of inflation becuase retail sale is the terminal ending point of the entire economic process where production exits the economy and becomes consumption and
4) enables us to cut taxes of all kinds (for those who abide by the new graciously beneficial policies of the new paradigm)...is "the end of private enterprise, innovation, and abundance." ???
The fact is it is the end of the rule of advanced Finance Capitalism and the rejuvenation of the very profit making economic system you imagine is or should exist, by resolving its major problems and by imbuing it with what it majorly lacks, namely an unassailable ethic of graciousness.
Keith, I'm sure you mean well, but you need to look past your orthodox mind filters and keep looking at the above temporal universe economic policy effects until you are able to see them...instead of just reacting to them.
With all due respect, your comments are wordy but meaningless & nonsensical. You have not discovered new rules of economics.
Inflation still hot, consumer spending still strong on the gusher of printed money they've been given by Santa's elves at Treasury. 'Transient' is becoming as legendary as 'if you like your plan you can keep your plan'. MMT isn't solving anything, it's exacerbating problems.
Neither you affirming the means of dominating the general populace and all other commercial agents except those that are already monopolies (austerity), nor MMT's failure to realize that reforms, even good reforms like MMT, within "free" market theory will never effectively deal with inflation. "Free" market theory is fantasy. It should rather be called Monetary and Financially Dominated Chaos Theory.
We are at the point where nothing except a new paradigm will effectively resolve our economic problems. THAT MUST BE COGNITED ON BY ECONOMISTS. Ptolemaic economics REQUIRES Copernican economics. All of the perfectly legitimate reductive analysis is simply not up to the task. It REQUIRES finding the SPECIFIC single, operant concept AKA paradigmatic analysis and the most workable and problem solving means of its application.
Brilliant guys like Steve Keen says exactly the above...and then immediately drops the idea and gets on to ANOTHER problem, the negative effects on energy caused by unchecked climate change, which changing the monetary and financial paradigm will enable the kind of mega projects needed to deal with that problem.
For chrissake lets put the horse back in front of the cart.
With all due respect, what gibberish.
With all due respect, its not my problem if you can't hold two ideas in your mind at the same time.