We’re not printing money. We’re creating reserves in the banking system.

Hilarious but technically true. Printing is not involved; therefore, there is no production cost.

The thing that got me about this new MMT stuff is the myth about treasury debt. One never has to issue bonds for any reason at all other than some law tells us to. I have come to believe the function of t Bonds is to give the plutocrats, and the Chinese et al, a risk free way to earn income. Strange, isn’t it, that the money used for the bailouts never added to the national debt? Just Ben issuing money to fix his problems. Gee we could do that all the time.

I too have to unlearn whatever they taught me those so many years ago. I’m still struggling through Dr Wray’s book.

That a former reality TV star can get elected to federal office speaks volumes about both our culture and our politics.

So what is your point ? The ludicrous essence of MMT is that wealth can be produced by printing/digitally creating money. That is why the asinine trillion dollar coin idea was laughed off the political stage.

It was amusing to see all the right-wingers who’d been obsessing in public about fiat money suddenly demonstrate that they had no clue what it really is.

Another fine diary — thanks. It is too bad all this upheaval is going on now — my mind, in its seventies – is not as sharp as it was. However, since I have never taken an Econ class and do not have to unlearn anything – I might have a shot.

The constraint for printing money is real resources – -not platinum. So long as there are unemployed people and capacity not being used, no problem arises. The coin was laughed off the stage bc people simply do not understand it. It is a far too simple truth.

There is no reason to think Duffy is stupid; he is obviously quite competent.

Oh, masaccio, you are a kidder.

I do understand it. It would be the equivalent of me finding a pile of dog crap, putting a $100,000 price sticker on it, then using it as collateral for a bank loan.

I think you are right. Wray explains that money is a form of debt, and so are treasuries. The difference is that the latter pay interest, and money doesn’t. So, say a Chinese firm sells a load of tools to Walmart. Walmart pays in dollars. The Chinese firm can’t use dollars so it exchanges them for Renminbi with its Chinese Bank. That bank sells the dollars to the Chinese Central Bank. The Central Bank wants to build up a reserve of US dollars to finance the trade surplus, but it wants interest. So, it exchanges its dollars for Treasuries.

As Tarheeldem points out, none of these transactions involves paper. They are all entries on the books of the banks. Savers are in the same place. We don’t want just to hold money we don’t need immediately. We want a return. If our primary goal is safety and access to our funds, we convert our bank deposits to Treasuries, all with just a few keystrokes, no paper involved.

As I say, there is a lot of unlearning to be done. You might start with Wray’s Primer.

If we never sold the T bond to the Chinese, they would have a demand deposit at a bank. So we are “nice” guys and let them earn interest. think they would stop selling to us of we never gave them a bond? Not likely and if they did so now we have more jobs and they have less.

On the subject of intrinsic value, what you are saying is that a substance like gold or platinum (substitute your favorite substance here) has no value that fits the definition of intrinsic?

From the physics point of view, true. However, if I have a need for a material for which there is no substitute and without it I am unable to accomplish a task which does have intrinsic value, even if it is only personal, than the substance/material does rise to the level, or nearly so, of intrinsic value, as what results is a tradeoff to obtain it and complete the task.

Extrapolating this to a universal need then cements the substance/material to truly intrinsic.

I suppose we might classify intrinsic value like we do energy…potential or kinetic. The definition of kinetic is dynamic, energizing, which gold and other similar rare elements do possess at the human level. We barter with it as an intermediate. The mere fact that the 1T coin has to be made of a rare metal seems to underscore this. Congress could have picked silicon!

The book by Randall Wray sounds intriguing so I’m going to read it. And I’m glad you’re bringing this topic alive, masaccio. But I think by dismissing myths surrounding money as “mere myths”, you’re in danger of undermining the very thing that makes it all work. I’m with you in describing money as used today as a myth for purposes of discussion. It is consistent with what I would call instead as a “shared illusion”. Or call it a “useful fiction.” It is what Keynes called a “convention.” What supports this convention, myth, shared illusion, call it what you like, is public confidence in it.

There are some cruel and stupid aspects of this myth or shared illusion which we would do well to eliminate since they are not necessary or intrinsic to the myth itself. It is perhaps long overdue that we discretely strip away the shared illusion for the moment to expose these cruel and stupid aspects of the myth without undoing the myth entirely lest public confidence in the myth be undone.

I have read Wray’s Primer. It is mostly babble dressed up in fancy language to justify Keynesian ponzi economics. The past decade has been the most Keynesian in world history with the housing bubble, among other things, the result of massive monetary stimulus through credit (i.e. money) creation. Let’s see how the situation looks in 5 years. The 2010′s will dwarf the 2000′s in this regard. I pity the young people. They are looking at a bleak, bleak future.

A nice analogy with the Copernican Revolution, masaccio. I know more about that than about economics, but it seems to me that money must be ideology, since the face it presents is usually that of a national hero; thus in the U.S. the bills themselves are sometimes ironically called Dead Presidents.

There was a rock band in the 1960s, whose name I have forgotten, whose lyrics demanded an immediate end to money. Maybe that’s something to think about.

Sometimes humor gets the point across.

http://www.theonion.com/articles/drunken-ben-bernanke-tells-everyone-at-neighborhoo,21059/

http://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/

“There was a rock band in the 1960s, whose name I have forgotten, whose lyrics demanded an immediate end to money. Maybe that’s something to think about.”

I hope you are being facetious.

Wray is a top notch Left-Keynesian with much to offer. As much as I wanted to like Graeber’s book on debt, it is too simplistic and marred by a quasi libertarian (individualistic and small-is-beautiful) understanding of how capital, class and the state actually operate.

Here is a useful, generally sympathetic but specifically critical review of Graeber.

http://jacobinmag.com/2012/08/debt-the-first-500-pages/

On the wider point, the US is so far from broke it is absurdly funny. There is plenty of room to renew a rational policy of appropriating revenues from economic elites in order to fund a robust public sector.

The current phase of cannibal capitalism is entirely self inflicted. But here is the thing, the problem is political, not technical. No one with the power to save capitalism from itself, has an interest in doing so.

“I hope you are being facetious.”

Not really. In the egalitarian society which I hope is the eventual future of humanity there will be no need for money: people will enjoy producing what people require. To be sure, I don’t claim we can dispense with money in the interim as the rock band in question thought.

That’s been so obvious for so long it drives me to think that only insanity can account for it.

However, there is the definition of insanity with those in power getting to define it.

For good or ill, the 2000s were most certainly not Keynesian, and certainly not the most Keynesian in “world history.” One simple piece of evidence against your “thesis” is that these have been times of low inflation. The downside of Keynesian high employment, high wage, monetary pump priming, is supposedly high inflation. So where is the high inflation that your side has been prattling about since the early 90s? Also, Glass Steagell was a core component of Keynesian approach to finance capital. Deregulation and bringing down the G-S firewalls drove the financial crisis of 08 far more than low interest rate mortgages.

Well, I don’t see any reason to use conventions that are causing so much damage, as Glenn Smith points out today at FDL. We need money, Wray says, at least enough to pay our taxes and other government obligations. And it’s useful for other purposes as well. That seems to me to be enough of a convention to keep moving.

Exactly, privatized “Keynesian ponzi economics”.

But then capitalist fraud is no resort either. Our century old transformation of Earth’s black puss into human art and craft has it’s own fantastic mythology.

Masaccio misunderstands the Church’s plight with Galileo. The simplified calculations of the heliocentric model undermined their priestly authority. Behind every “ideology” is the profit of con men.

Con man Samuelson wished to constrain the power of the state against capitalist fraudsters. Con man Wray wishes to constrain the power of Samuelson’s spawn against the state.

Gimmick upon gimmick does not arrive at the truth.

Perzactly what Ben Bernanke is confessing that the Fed is doing. Only you don’t need to find the dogcrap, just put the sticker on it.

“Moving the decimal place” has become the functional equivalent of LBJ’s “running the money presses hot.”

Hmm, are you saying that stuff Ben has been buying is dog poo?

Accepting MMT, with its simplified wealth creation, requires answers to some questions.
–Why have ANY federal taxation or borrowing, when the government can simply create wealth and spend it?
–What would determine inflation/deflation of the currency?
–Has any country actually done it?
–Has Brussels considered MMT for the Euro?

Book Salon up with Marcus Rediker’s The Amistad Rebellion: An Atlantic Odyssey of Slavery and Freedom hosted by Nicholas Guyatt

Taxation means you have to get dollars to pay taxes. That, in turn, creates a demand for the currency.,Other than that the only constraint is inflation. Inflation happens when all resources are fully employed, meaning labor and capacity. It can be controlled by increasing taxes. Europe use it? Shit they have no idea,what it is.

I think you are neglecting the fact that the US dollar is the world reserve currency. It has intrinsic value because of that. If you are Zimbabwe the central bank can create all of the reserves in the banking system that it wants to, but probably no one would regard such reserves as having any value.

Here is a critique of Beggs carping.

There is plenty of room for all kinds of wild imaginings, but in this political economy, there is obviously not much for funding a robust public sector. To imagine that capitalist constraint on such is just mad raving, like the Catholic Church’s against Galileo, is to misunderstand what the capitalist economy is based on and why it is in the state it is.

The current phase of cannibal capitalism is far from “self inflicted”. This just demonstrates how out of touch your framing is.

–People work for compensation only to pay taxes? No.
–I would think that dollar value could be controlled by the amount of dollars in circulation, no?
–If MMT is such an obvious approach then why has no country, old or new, big or small, ever done it? A Gulf state, say, which has no constraints at all and plenty of smart people.

Don, taxes are a gov function. Gov levies the tax. Of course we would rather not pay it. But once know we will have to pay it, we accumulate dollars and not sea shells so to speak. That means other people will take it too since they know everyone wants dollars and not shekels. It makes dollars acceptable.

Yes gov controls the dollars in circulation by taxing. More taxes, less money.

At one time many govs used gold to back money. That makes all the difference. Why no one uses it today is a carryover from gold standard, stupidity ( or to be nice, ignorance) and a little thing some call neo liberalism. Letsgetitdone has written a few diaries on it.

I’m asking why does the government levy the tax if it doesn’t need the money, and also why does it borrow.

Question: If all money is debt, how is the U.S. government going to pay me for the $100 of their debt that’s my wallet? What currency will it use? Euros? Pounds? Other dollars?

Answer: Redemption through Forgiveness. The U.S. government will redeem those IOUs in my wallet by forgiving $100 of my debt(s) to them. And, btw, the dollars in my wallet are transferable tax credits that I can sell to others in exchanges for assets and services.

Doesn’t need to borrow.think I answered first part. But it is done also to redistribute income.

U.S. taxes must be paid in dollars, and that’s the only intrinsic value of a dollar — it’s a transferable tax credit.

The value of the dollar is a matter of supply and demand: Taxes both supply the only intrinsic demand for dollars and reduce the number of dollars available in the money supply (i.e., take dollars out of circulation).

A lot of the distorted view of money that we live under are the result of banker propaganda. Per Ellen Brown, 99.99% of the dollars in circulation (M3) has been issued by banks and earns them interest. Bankers propagandized and lobbied long and hard to prevent our government and others from issuing their own money in any significant amounts. And the tactics are always the ones taught on law school:

If the law is against you, argue the facts. If the facts are against you, argue the law. If both the facts and the law are against you, pound the table and call the other side names.

We’ve certainly seen all three in the debate over platinum coinage.

The economic equivalent of the flat-earth theory or the theory of the Earth-centric universe is the BIG LIE that we are constrained by nature, law, and good sense to cover our tax deficits with borrowed money. It can’t be constitutional to do anything else. It will cause hyperinflation to do otherwise. It would be absurd, silly, hilarious, immoral, irresponsible, unfair, dangerous, etc. to do anything else.

Thanks for the link to Beggs; I took a look at the article. A significant part of his argument has to do with inflation. Many of the current restrictions on US government policies are designed to deal with fears of inflation. Wray and others in the MMT area are all over this problem.

Beggs’ attack on Graeber is based in large part on Beggs’ perception of Graeber as an anarchist, a really scary term for him. I can’t find any evidence of anarchism in the text myself, not that it matters to the quality of the argument. Beggs doesn’t deal with the violence that is always associated with capitalism, which I have discussed several times in my posts, and which Graeber discusses in detail. That’s outside the mindset of those who practice mainstream economics. They rarely even deal with the externalities connected with such commodities as oil, including both international violence and climate-changing pollution, and any work in that vein is totally ignored by politicians.

I certainly don’t think much of economics as it is currently practiced, and I’m open to listening to people who don’t mouth the party line of the elites, and who feed from the crumbs of their tables, like the Mercatus Center hacks and the Cato Institute. Wray fits that category, and so does Graeber. Maybe Beggs could use some more open-mindedness.

Whose side are you on anyway?/s

JMO but mainstream economics is a con game. It is a shame so many pay so much for that nonsense.

On the secondary contradiction between Wray and Graeber, Wray is the con man.

Unfortunately, the flat-earthers, earth-centrists, and the BIG-LIARS have denounced me. Which leaves me no alternative but to join their opponents. ;-)

It’s not easy being green I’ve been told.

–Why have ANY federal taxation or borrowing, when the government can simply create wealth and spend it?

Regarding taxes, see #38. Regarding borrowing, we don’t NEED borrowing, but there are several reasons we might want to have borrowing:
* To give pension funds, including SS, a secure, interest-bearing place to invest their money.
* To give China a reasonable way to recycle their dollars.
* Bonds lose value during times of high interest, removing net financial assets form the private sector, thus reducing demand for goods and services.
* Government borrowing drives up interest rates which discourages private sector borrowing causing the private sector money supply to shrink as loans get paid off.

–What would determine inflation/deflation of the currency?

Taxation and the slack in the economy.

–Has any country actually done it?

The U.S. during the civil war. The European nations during WW I. And, Germany during the Nazi era. Those are the examples I know of, but I suspect there are a lot more.

–Has Brussels considered MMT for the Euro?

European nations are in the same position as U.S. states. They don’t print their own money. And, the response to their plight is totally in accord with the neoliberal “Washington Consensus,” i.e., they demand austerity.

FWIW, here is an excellent article by Bill Black explaining some of the origins and history of the so-called “Washington Consensus,” Austerity, and the Neo-liberal doctrine.

As you can see, I’m having a blast with this stuff. But, I’m still trying to figure it out.

I am not one who supports any of those reasons for issuing t bonds. For SS, as you know, the gov simply cannot go bankrupt. Why should I care about China? They can invest it in stock just like you and me or spend it. No need to give them interest. Interest on bonds is a nice secure way for the rich to have risk free assets. Pension funds have many conservative vehicles for investments. So for now, I will pass on interest for bonds, I like the current zero bound.

We had twenty percent interest with Volcker and inflation at the same time. If inflation is a problem reduce spending or raise taxes.

So bottom line, no need to have borrowing, lets not do it. Besides we don’t borrow anything anyway. We simply exchange one asset for another totally at our discretion— reserves for bonds.

Bargaining with Global Capitalism:

The bargaining that people-powered and workers’ movements should be demanding and militantly fighting for, then, is one where power relations are significantly transformed against the interests of capital and corporate wealth in favor of a more democratic commons. Furthermore, the need for the radical re-structuring of the state institutions that protect Wall Street interests must not be underestimated either – because even the most populist US president still sits atop a capitalist order.

MMT is fraud contra fraud.

Keep in mind that we can print/mint money to pay interest, just like anything else. The interest paid to the SS Trust Fund is a way of subsidizing SS. Of course, we’ll eventually have to subsidize it directly, increase its revenues, or cut benefits. So this subsidy simply kicks the can down the road.

If the Chinese got aggressive about market investments they could perform a whole lot of mischief that I’d prefer they did not.

As a matter of “real politics,” it is much more difficult to raise taxes than it is to raise interest rates, which can slow new private borrowing to a trickle whereupon normal loan payment drains money from the money supply.

IMHO, MMTers are entirely too glib about the prospect of being able to raise taxes to control inflation.

I have heard no convincing explanation for the stagflation of the late 70s. But in late summer 1976, I met an MIT professor from their Sloan School of Business who was betting heavily on inflation and already making a fortune on it. He was buying up as much sea-front property in New England as he possibly could, using the gain in the value of one property as collateral on the next, and then refinancing it to make his payments. I never did hear if he managed to get out in time. But I did go ahead and buy myself a house on the basis of what he had told me.

The trouble with conventions is that it’s not just up to you or me to use or not use them to be bound by them. But conventions based on public confidence are dangerous to mess around with. Public confidence is a “confidence game”. We saw that in 2008 when people got a glimpse into the black abyss and saw what a collapse of public confidence in money would look like. Who knows for sure what really happened. The banksters all said the banking system was at risk and the government and the public believed them. Never mind that it’s all just “public confidence” to begin with. They played this like a Stradavarius promising the government public confidence would be restored if it gave them the keys to Fort Knox. And it did. No strings attached. And public confidence was restored. I think this performance could be repeated and it just might be.

But conventions based on public confidence are dangerous to mess around with.

Exactly. The public has to be confident that U.S. taxes will continue to be payable only in dollars, which makes dollars intrinsically valuable.

… also that borrowers will have to repay their dollar-denominated loans with dollars.