Modern Monetary Theory

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Re: Modern Monetary Theory

Postby Elvis » Thu Jun 06, 2019 2:03 am

^^^^ Excellent!

Inflation - "In Cuba, health care and education are Free, and toys and food are expensive... the Socialists are smartest of them all. Baumol was right[1] — Healthcare and education are overpriced because the opportunity cost of labor is high. Cuba gets it. By running an authoritarian commie state, they don’t waste human resources on politics and media and bankers and other parasites. That frees up a lot of manpower for people to become doctors."


An authoritarian commie state doesn't seem necessary. The "market" is a lousy planner. One carefully crafted law could go a long way. I'm seeing (inevitably) AI in the mix, e.g. a 'tax board' composed of neural networks? If we must have technocracy let's make the most of it.
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Re: Modern Monetary Theory

Postby Elvis » Thu Jun 13, 2019 9:16 pm

Dr. Stephanie Kelton has a new book out!

https://thedeficitmyth.com/

Image

The Deficit Myth

Vice-president Dick Cheney famously boasted, “Reagan proved deficits don’t matter.” He was wrong.

Deficits do matter, but not the way we’ve been taught to believe. We’ve been told that China is our banker and that Social Security and Medicare are pushing us into crisis. We’re told the U.S. could end up like Greece and that deficits will burden future generations. These are all myths.

Deficits can be used for good or evil. They can enrich a small segment of the population, driving income and wealth inequality to new heights, while leaving millions behind. They can fund unjust wars that destabilize the world and cost millions their lives. Or they can be used to sustain life and build a more just economy that works for the many and not just the few.
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Re: Modern Monetary Theory

Postby Elvis » Thu Jun 13, 2019 9:23 pm

Watch Dr. Kelton school the CNBC idiot (Joe Kernen?), who maintains the "all or nothing" juxtaposition of socialism vs. capitalism. He says socialism means "the govermnet owns the means of production" and brings up Venezuela (of course), apparently unaware that Venezuela's economy is primarily capitalist. Regarding "higher taxes," he asks "what do you do with the money you collect?" The Heritage guy is equally stupid. Maddening!



https://www.youtube.com/watch?v=nycgQXjo3qY

CNBC Television
Published on Jun 13, 2019

Stephanie Kelton, senior economic advisor for Bernie Sanders during his presidential campaigns, and Joel Griffith, research fellow at the Heritage Foundation, join "Squawk Box" to discuss what a Bernie Sanders presidency might mean for the markets and the economy.
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Re: Modern Monetary Theory

Postby Elvis » Thu Jun 13, 2019 10:03 pm

More brilliance, Jane Sanders interviews Stephanie Kelton in this well-organized explication.

They are both such smart, lovely people. :lovehearts:


https://www.youtube.com/watch?v=qoMamSmsAIM
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Re: Modern Monetary Theory

Postby Elvis » Thu Jun 13, 2019 11:21 pm

No hardcover yet, just Kindle.

https://www.amazon.com/Deficit-Myth-Mon ... nie+Kelton

The Deficit Myth: Modern Monetary Theory and Creating an Economy for the People
by Stephanie Kelton (Author)

The leading thinker and most visible public advocate of modern monetary theory - the freshest and most important idea about economics in decades - delivers a radically different, bold, new understanding for how to build a just and prosperous society.

Any ambitious proposal - ranging from fixing crumbling infrastructure to Medicare for all or preventing the coming climate apocalypse - inevitably sparks questions: how can we afford it? How can we pay for it? Stephanie Kelton points out how misguided those questions really are by using the bold ideas of modern monetary theory (MMT), a fundamentally different approach to using our resources to maximize our potential.as a society.

We've been thinking about government spending in the wrong ways, Kelton argues-on both sides of the political aisle. Everything that both liberal/progressives and conservatives believe about deficits and the role of money and government spending in the economy is wrong, especially the fear that deficits will endanger long-term prosperity.

Through illuminating insights about government debt, deficits, inflation, taxes, the financial system, and financial constraints on the federal budget, Kelton dramatically changes our understanding of how to best deal with important issues ranging from poverty and inequality to creating jobs and building infrastructure. Rather than asking the self-defeating question of how to pay for the crucial improvements our society needs, Kelton guides us to ask: which deficits actually matter? What is the best way to balance the risk of inflation against the benefits of a society that is more broadly prosperous, safer, cleaner, and secure?

With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT busts myths that prevent us from taking action because we can't get beyond the question of how to pay for it.


Orthodoxy tries to scare us with twisted framing: "High emploment means inflation!!!"


Also, in the Jane Sanders/Stephanie Kelton interview above, I love "Turn the 'Unemployment' office into the 'Employment' office.
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Re: Modern Monetary Theory

Postby Sounder » Fri Jun 14, 2019 6:27 am

I looked at a five dollar bill, it says it is a federal reserve note,- they own it.

I cannot square the following from MMT proponents with some peoples attitudes here toward the FED and their cost to society.



Great thread, thanks Jack. The trick here is that the middleman can be cut out, and given that Central Bank charters have been revoked in the past, they can be again. MMT realizes that states don't go bust because they issue the currency. Score an empirical point, but the middleman is not needed and all countries can issue currency directly, as Libya was doing until Qaddafi was removed.


The Fed is actually a consortium of private banks—its “members,” who own its stock and receive a 6% dividend from its activities. To start with. They also get interest on the 10% reserves they hold, which Ellen Brown calculates nets them “at least $700 billion annually” in public money. So, the Fed is “a servant to the banking system while also trying to be a public purpose servant. It has, in effect, two masters by design.”

To give the simplified version of a complicated set of financial relationships: Its nominal master, the US government, has ceded to the Fed the authority to create money via debt instruments (Treasury securities); and the Fed has in turn passed that authority to its effective master, the private commercial banks, which create money through interest-bearing loans. In the American monetary system, it is not the people’s government, but the bigamist Fed and its member banks that create money, and money is debt.

As Positive Money explains: “Most of the money in our economy is created by banks...Banks create new money whenever they make loans. 97% of the money in the economy today is created by banks, whilst just 3% is created by the government.”
(Jack says different)
And Ellen Brown: “Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.”

And David Graeber: “[E]verything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes.”

So, we have a “legal order” that grants banks the right to create money as debt. That grants private banks the exclusive right to create money in the form of interest-bearing debt that they profit from. This is apex privatization—the privatization of the power to create money.

(Yes, Apex privatization, and Jack screams that I am a troll and a right-winger, get a grip, who here supports apex privatization?)

This shifting of monetary authority out of the hands of government and into the hands of an unaccountable, kinda-sorta public-ish, but really privately-owned, banking cartel is not dictated by any economic logic. Indeed, as MMT shows, it contravenes the logic of fiat currency and monetary sovereignty, which allows the government to make as much of its own debt-free money as it wishes. As Ellen Brown points out: “If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves.”
All these things will continue as long as coercion remains a central element of our mentality.
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Re: Modern Monetary Theory

Postby JackRiddler » Fri Jun 14, 2019 8:00 am

Sounder » Fri Jun 14, 2019 5:27 am wrote:
Confused collection of apparent quotes from earlier threads mixed up indistinguishably with Sounder's own bullshit interpolations and trolling, without distinction wrote:
(Jack says different)


Jack screams


To the "Sounder" Entity:

Every other idiot on this board understands how to use the quote function properly. If you still haven't figured it out, my assumption henceforth will not be that you are incompetent, but that you prefer this common TROLL move.

It is incumbent on you to source the quotes you deploy in your own goddamn posts, and to avoid confusion about what is quoted matter and what is your comment. You almost never bother to do this. That is not my work to figure out. It is not my work to defend myself against your filthy practice of false or confused attribution of statements to me. I will not reply to anything from you mentioning my name or suggesting quoted matter that does not include proper sourcing.

On the contrary, any attributions of material or opinions to me that is not sourced in a clear fashion will be regarded as hostile action, even in cases where it may turn out to be accurate. In short: The work of attribution within your posts is YOURS. You don't get to waste my time figuring out what the fuck YOU are purporting to talk about, or what the fuck YOU are purporting to me.

All such cases will be alerted until such time as you cease the hostile action, or are banned from this board for the constant trolling and pretend-stupid act that you do, which not coincidentally always happens to promote some Alt-Rightish mystification or misconception or campaign du jour. Incompetently, to be sure, but incompetence can no longer be your excuse.

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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 3:16 pm

First—Sounder, would you mind straightening out your sloppy andf confusing non-attribution of the quote above? Thanks.

Next, I think you have some mistaken notions about the Federal Reserve and MMT.

Sounder wrote: the US government, has ceded to the Fed the authority to create money via debt instruments (Treasury securities); the Fed has in turn passed that authority to its effective master, the private commercial banks, which create money through interest-bearing loans.

All incorrect. The Fed, regulated by Congress, is the master and a regulator of the private banks. The Fed was created to end the mass confusion of private bank-note money which predominated over most of the preceding decades.

The Federal Reserve is far from perfect, it's been rearranged at times to improve its function, and Congress can make any change to the Fed that we might demand, merge it with Treasury or even abolish it (all possibilites in the MMT view, although consolidation with Treasury is preferred by Wray.).

The Fed does not "create money" my selling Treasury securities; the Treasuries are purchased with already-existing money.

Also, the Fed does not create a single penny that Congress has not appropriated, or specifically directed the Fed to create by law (TARP, e.g.).


Sounder wrote:As Positive Money explains: “Most of the money in our economy is created by banks...Banks create new money whenever they make loans. 97% of the money in the economy today is created by banks, whilst just 3% is created by the government.”

Commercial bank loans have a net-zero effect on the money supply because they are constantly being paid down to zero (with already existing money). Too much lending can overheat an economy but the money never stays in the economy (so when we hear about capitalist "wealth creation," that really just means "wealth accumulation."

One important difference between bank lending and federal spending is that the federal spending does not have to be "repaid" to anyone (despite what some people want you to think). And when the government does not tax back all that it spends, that remainder is the money that persists—it's where your $5 bill came from.

When the government taxes back all that it spent, that leaves no money in the economy for us. That's a depression or recession—when nobody has any money because the federal governent taxed back all that it spent. This is why imposing a 'balanced budget' on the federal government is a terrible, terrible idea.


Sounder wrote:The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes.”

I'd loved to have heard your opinion about all this in 1800, when creating and issuing money in America was considered a human right (Galbraith, Money: Whence It Came and Where It Went). Anyone could start a bank and issue their own "bank notes." This naturally had its problems but without those banks, growth in the West would have been impossible or greatly impeded—which may have been "just as well" but that's another question; the question here is, "does 'paper money' necessarily mean inflation, economic slavery and disaster?" Answer: No. By no means. In the first half of the nineteenth century, farmers, then 90% of the population, absolutely depended on the frontier banks.


Sounder wrote:As Ellen Brown points out: “If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves.”

It's true the creators of the Fed sought to maintain a debt model, mostly because their greatest fear was—after experiencing the booms and busts of the wild and woolly days—inflation. But the U.S. didn't go off the gold standard (domestically)* until 1933, so fiat money creation wasn't even on the table in 1913 when the Fed was created.

The important point is that MMT proposes more or less what you desire here: "debt-free" U.S. legal tender created to buy goods and services for the public good, stimulate economic activity and additionally serving as an enormously convenient exchange medium.

Sounder, have you read this?:

http://home.hiwaay.net/~becraft/RUMLTAXES.html

The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. Two changes of the greatest consequence have occurred in the last twenty-five years which have substantially altered the position of the national state with respect to the financing of its current requirements.

The first of these changes is the gaining of vast new experience in the management of central banks.

The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold.


* (The U.S. adopted a gold standard in 1837 and so it remained until 1933.)


And I'll add, Sounder, that the "sound money" you hanker for was promoted by precisely the entities you (and I) vilify—those already rich who want more, want it all. It was the wealthy elite who clamored for "sound money" because they knew they could profit from such activities that would otherwise be funded by the federal government. We're still paying for the "sound finance" that the gold-buggers want to bring back and impose in full on the rest of us.

Is that what you want?—federal spending constraints that benefit only the rich? "Trickle down"? That's what you're advocating.


Finally, you have not responded to my reply to you in this thread, this time I expect one.
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 3:38 pm

This may help—an excellent, condensed review of what MMT is and is not:


https://www.youtube.com/watch?v=7cho7naef_k

Interesting, at around 12:50 she says, 'MMT is not about saying taxes are for fighting inflation"; this knocked me back in my chair a bit because that's exactly what I've been telling everyone. But it'd be fair to say that other MMT economists see that differently. One thing I think she's trying to do is get the focus off taxes and onto ecomonic inequality, for which one effective remedy is taxation.

She's correct about shortages causing inflation, but blames the 1970s inflation on the oil shortages; Galbraith has shown that the inflation was well set in months before the oil shock. More likely the Vietnam war caused the inflation: lots of money being being spent, but not on lasting productive things, plus all those resources taken out of the country and much of it, by its nature, just destroyed in fighting.
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 3:58 pm

I forgot to mention a hopeful note: at the very end of the interview, Kelton acknowledges that she's been advising other Democratic candidates besides Bernie, but won't say which ones: "If they don't go public, then I don't go public."

This confirms that some of the candidates have at least been briefed on MMT by Kelton, and if they're sharp they'll grasp it. But if they're sharp they'll be very cautious about speaking of it too quickly. As Al Gore told Warren Mosler in 1996, after Mosler easily convinced Gore in a few minutes that a surplus for the federal budget equals a deficit in the non-government sector: "You're right. But I can't go out there and say that—I'd be laughed off the stage!"

This is not an accident. In the last century, Big Money pressed for "sound finance" in government and even persuaded leading clergy to expound its necessity from the pulpit. That was just one facet of the East Coast elite's PR campaign to promote "sound money" as the only way. It was very effective, taught in all the schools and praised in every newspaper, and today, because no one can imagine anything different, Americans can only argue against their own interests.

Elvis » Thu Jun 13, 2019 7:03 pm wrote:More brilliance, Jane Sanders interviews Stephanie Kelton in this well-organized explication.

They are both such smart, lovely people. :lovehearts:


https://www.youtube.com/watch?v=qoMamSmsAIM
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 4:15 pm

This article very apropos to the lastest exchanges here, and points out the much under-recognized fact that big banks and big business in general profit from tightly constrained federal spending—always at the expense of the little guy and the society in general.


The aim of neoliberals is to prevent governments from spending money to revive growth by running deficits. Their argument is: “If a government can’t run a deficit, then it can’t spend money on roads, schools and other infrastructure. They’ll have to privatize these assets – and banks can create their own credit to let investors buy these assets and run them as rent-extracting monopolies.”

[Note: this is not rocket surgery.]

The bank strategy continues: “If we can privatize the economy, we can turn the whole public sector into a monopoly. We can treat what used to be the government sector as a financial monopoly. Instead of providing free or subsidized schooling, we can make people pay $50,000 to get a college education, or $50,000 just to get a grade school education if families choose to if you go to New York private schools. We can turn the roads into toll roads. We can charge people for water, and we can charge for what used to be given for free under the old style of Roosevelt capitalism and social democracy.”

This idea that governments should not create money implies that they shouldn’t act like governments. Instead, the de facto government should be Wall Street. Instead of governments allocating resources to help the economy grow, Wall Street should be the allocator of resources – and should starve the government to “save taxpayers” (or at least the wealthy). Tea Party promoters want to starve the government to a point where it can be “drowned in the bathtub.”


Above all, the aim is to dissuade them from thinking about how it doesn’t have to be this way. There is no natural law that says that they should be squeezed by debt, monopolies and fraud. But that kind of thinking requires an alternative program – and an alternative program requires recapturing the language to explain what it is that you’re trying to create as an alternative.


Precisely exactly.
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 4:50 pm

Before this gets forgotten in a folder — Lawrence Summers practically arguing for MMT, but still hung up on "debt." Summers has been rewarded all his life for learning, teaching and applying the principles of "sound money" and it's only now, past the crest of his career, that he can safely broaden his thinking. He's still mired in it but this is a start.

Summers also probably saw new light when the QE plan worked as well as it did. (And pertinent to mention here Bernanke's confirmation that 'none of it was taxpayer money' nor was it borrowed; they simply created it by typing in new numbers in accounts.)

Keep in mind that Harvard-trained former Treasury Secretary Larry Summers, who taught economics at Harvard for decades, admitted to Warren Mosler, "I don't really understand reserve balance sheets." \<] Treasury and Fed operations and the tax code remind me of some complex financial derivatives—many of them can only be understood by the people who wrote them.

http://larrysummers.com/2019/01/28/whos ... cle_inline
1/28/2019
Who’s Afraid of Budget Deficits?
By Jason Furman and Lawrence H. Summers

[. . .]
WHAT REALLY MATTERS

Much more pressing are the problems of languishing labor-force participation rates, slow economic growth, persistent poverty, a lack of access to health insurance, and global climate change. Politicians should not let large deficits deter them from addressing these fundamental challenges. A do-no-harm approach would allow large and growing deficits for a long time, but it would put some constraints on the most ambitious political agendas. Progressives have proposed Medicare for all, free college, a federal jobs guarantee, and a massive green infrastructure program. The merits of each of these proposals are up for debate. But each idea responds to a real need that will take resources to address. Some 29 million Americans still do not have health insurance. College is unaffordable for far too many. Millions of working-age Americans have given up even looking for work. Global warming cannot be ignored. Add in the widely shared desire for more investments in education and infrastructure and the likelihood that defense spending will keep rising, and the federal government will clearly have to spend a lot more.
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 5:40 pm

For anyone wanting to get serious: haven't read this yet but "chartalism" contributes to MMT thought. Free 162 page PDF:

https://socialsciences.mcmaster.ca/~eco ... yMoney.pdf

THE STATE THEORY OF MONEY

BY GEORG FRIEDRICH KNAPP

1924


Georg Friedrich Knapp (German: [knap]; March 7, 1842 – February 20, 1926) was a German economist who in 1905 published The State Theory of Money, which founded the chartalist school of monetary theory, which argues that money's value derives from its issuance by an institutional form of government rather than spontaneously through relations of exchange.

https://en.wikipedia.org/wiki/Georg_Friedrich_Knapp



Edit: The 'English edition may' be abridged in important ways:
Apart from its theoretical insights, the book is particularly interesting in that it is a very detailed source of information on 19th century European monetary history, focusing on the following countries: England, France, Holland, Austria and Germany. Due to a lack of financial means, the Royal Economic Society voluntary omitted the translation of Chapter IV which contains a historical review of England, France, Germany, Austria, and appendices containing specific case studies. All the same, even in its abridged English version The State Theory of Money depicts precisely the many changes which happened during the course of the 19th century: a general move from bimetallism to monometallism, the appearance and disappearance of paper money systems (in particular the Austrian one of 1866), the almost systematic use of paper money by the State in case of war alongside existing means of payment, the emergence of bank-notes and the use of Giro payments etc.


I'll look for translation of the missing chapter.
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 6:22 pm

Knapp described the modern monetary system, where Chartal money has developed:

When we give up our coats in the cloak-room of a theatre, we receive a tin disc of a given size bearing a sign, perhaps a number. There is nothing more on it, but this ticket or mark has legal significance; it is a proof that I am entitled to demand the return of my coat.

When we send letters, we affix a stamp or a ticket which proves that we have by payment of postage obtained the right to get the letter carried.

The “ticket” is then a good expression . . . for a movable, shaped object bearing signs, to which legal ordinance gives a use independent of its material. Our means of payment, then, whether coins or warrants, possess the above-named qualities: they are pay-tokens, or tickets used as means of payment . . .

Perhaps the Latin word “Charta” can bear the sense of ticket or token, and we can form a new but intelligible adjective – “Chartal.” Our means of payment have this token, or Chartal, form. Among civilized peoples in our day, payments can only be made with pay-tickets or Chartal pieces.
(Knapp [1924] 1973, pp. 31–2)

Note that like the tin disc issued by the cloakroom, the material used to manufacture the Chartal pieces is wholly irrelevant –it can be gold, silver or common metal; it can be paperand today,it can be electronic entries on tape or hard-drive.
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Re: Modern Monetary Theory

Postby Elvis » Fri Jun 14, 2019 6:50 pm

Reading this 2014 paper by Randall Wray may save me from reading all of "State Theory of Money"—it's 35 pages and by page 8 I can recommend it highly:

http://www.levyinstitute.org/pubs/wp_792.pdf

From the State Theory of Money to Modern Money Theory: An Alternative to Economic Orthodoxy
by L. Randall Wray
Levy Economics Institute of Bard College
March 2014


The paper points out another thing — the practice of issuing fiat money has almost always emerged when a government was in a crisis, usually war. As always, "How do we pay for it" is never a question when it comes to war.
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