DTM-koen bi lan berri – Heterodoxia

(1) Randall Wray:

Taxes are for Redemption, Not Spending¹

“When the sovereign issues currency, she/he becomes a debtor. The sovereign’s currency is debt. The holder of the currency is the creditor. The most fundamental promise made by any debtor is the promise to redeem, by acknowledging his/her debt and accepting it. Those who themselves have debts to the sovereign can submit the sovereign’s debt in payment. Refusal by the sovereign to accept his/her own debt is a default. This will have implications for future acceptance of that sovereign’s debt.

Acceptance by the sovereign of his/her own debt is redemption. (…) Redemption “wipes the slate clean”. It eliminates the debt. (…)

Homeowners commonly used to have mortgage note burning parties when they redeemed themselves by paying off their homes. Probably no one lives long enough any more to do that.

I have argued that the sovereign imposes debts – tithes, fees, fines, and taxes – on the population. Those with tax debts can redeem themselves and wipe clean their tax debt by delivering back to the sovereign her/his tallies, coins, or paper notes. Today it is actually done with keystrokes – debits to private bank deposits and the bank reserves at the central bank. Note that tax payment redeems both taxpayer and sovereign. Isn’t that nice? The sovereign’s currency is burned, and the taxpayer can burn her tax bill. Hallelujah!

Currency must be debt and it must be redeemed to have a determinant nominal value in terms of the domestic money of account. The sovereign might make other promises when she/he issues debt. There could be a promise to pay interest over time. There could be a promise to redeem her/his debts for the debts of other sovereigns. While uncommon even in history, the sovereign could also promise to redeem for precious metal bullion. These are additional promises but are not necessary to create a demand for the sovereign’s currency.

Taxes remove currency from circulation; this has long been recognized as a way to prevent currency issues from causing inflation. However, it is not necessary to remove all the issued currency through taxes. Some will continue to circulate to facilitate private transactions. Some can be accumulated as net saving. And some can be “redeemed” for bonds should the treasury decide to sell them. To an uncertain but significant degree, the difference between spending and taxing over any particular period is “endogenously” determined by economic activity. By definition. The government’s deficit (its spending less its tax receipts) must equal the nongovernment sectors’ surplus (receipts from government spending less tax payments). In nominal terms, the equation is guaranteed and we can even assert that it is a position that is desired by the nongovernment sector (for otherwise, it would have spent more – reducing the government’s deficit – or less, raising the deficit). The question is whether that equality occurs without inducing inflation or currency depreciation. There is no question that the sovereign can “afford” it. “

(2) Bill Mitchell:

Eurozone Groupthink and Denial on a Grand Scale²

“Many Eurozone Member States now face a future of stagnation and elevated levels of unemployment and rising poverty if they remain in the Eurozone. Restoring currency sovereignty and targeting domestic expansion with a strong commitment to full employment is the best path forward for any or all Member States. The constraining forces of the neo-liberal Groupthink, however, make such a move very difficult to achieve. Eventually, social instability will put a “wrecking ball” through the failed European Project and the nations will have to seek their own paths.”

(…)

Mitchell (…) provided a detailed framework for a nation seeking to exit the Eurozone (…). Any exit scheme has to address the same issues:

How to handle the euro denominated public and private debt that is outstanding.
How to handle bank deposits denominated in euros within the exiting nation.
How to ensure financial stability is maintained.
How to deal with on-going current account deficits? Trade controls?
How to introduce the new currency (for example, unilaterally or as an interim dual currency).
How to manage the inevitable large currency depreciation and to minimise the resulting inflation risk and protect real living
How to reduce speculative capital flows (for example, using capital controls).
How to deal with any changes to the legal framework governing cross-border trade if the nation also is expelled from the EU, among other issues.”