Kongresua eta Gobernua (Altxor publikoa gehi Banku zentrala)

Gobernu subiranoa, alegia, moneta jaulkitzen duen gobernuaren kasua…

Eric Tymoigne‏ @tymoignee aza. 4

(https://twitter.com/tymoignee/status/927669911341506560)

Saturday question (followed by Sunday Q and analysis): Does the US government issue the USD?

Eric Tymoigne‏ @tymoignee aza. 5

For those of you who answered “YES” to the previous Q (34 people max can answer this Q): do taxes and bond offerings finance the US gov?

 Eric Tymoigne‏ @tymoignee

First pool shows an ambiguity is what”U.S. Government”means in this context.Let’s start with some examples of what’s meant in this context:

Eric Tymoigne‏ @tymoignee

While it is true that the US Treasury lost (most) of its monetary creation power, Government here means US Treasury and the Fed.

Eric Tymoigne‏ @tymoignee

It is a rhetorical strategy that gets to the point. One could drag on about minutiae of Treasury and Central bank coordination instead but

Eric Tymoigne‏ @tymoignee

one’s audience would fall asleep&lose sight of main point: Congress sets budget, Treas executes it, Fed ensures funding is there to execute it

Eric Tymoigne‏ @tymoignee

Consolidating Fed&Treas is also a common modeling strategy to simplify analysis.

Eric Tymoigne‏ @tymoignee

While a simplification, it is backed by institutional realities of monetarily sovereign govs. This simplification cannot be made for non MSG

2017 aza. 6

Eric Tymoigne‏ @tymoignee

Replying to @tymoignee

Now moving on to the second question, that’s where things get interesting. If you agree with ST Fed, Buffet, and Greenspan (and many others)

Eric Tymoigne‏ @tymoignee

Then yes the US gov print the currency AND you MUST also agree that taxes and U.S. gov bonds do not fund the US gov.

Eric Tymoigne‏ @tymoignee

It is an implication of consolidating Treasury and central bank into the U.S. Government.

Eric Tymoigne‏ @tymoignee

Curiously, while most are willing to accept the first implication(gov prints) most have a harder time accepting the second (taxes do not fund)

Eric Tymoigne‏ @tymoignee

Pretty sure that if you asked STFed, Buffet and Greenspan if taxes funds the US gov (in the meaning they use it above), they would say yes

Eric Tymoigne‏ @tymoignee

Below is a balance sheet representation of the quotes above:

Eric Tymoigne‏ @tymoignee

Treasury and central bank are put into one balance sheet and so all claims they have against one another are eliminated.

Eric Tymoigne‏ @tymoignee

For the US Gov, taxes destroy currency(L1 falls) and claims on non-fed sectors falls (A1 falls). When US spends, it credits accounts (L1 rises)

Eric Tymoigne‏ @tymoignee

So taxes don’t provide funds to US gov (no monetary asset is gained): taxes don’t finance anything, so no need to ask “how are we going to pay?”

Eric Tymoigne‏ @tymoignee

Taxes are needed but not to fund the “US gov” as defined by STFed, Greenspan, Buffet and anybody else arguing that US can print its currency

Eric Tymoigne‏ @tymoignee

My experience (with students and others) is that they are prepared to accept that the US prints its currency, they have a visceral reaction

Eric Tymoigne‏ @tymoignee

to the point that taxes don’t finance the US gov; but once explained it’s accepted,which provides a clear understanding of policy constraints

Eric Tymoigne‏ @tymoignee

For MSG: 1-the constraint is not money, it is finding the physical resources 2-a budget is needed to preserve transparency and accountability

Eric Tymoigne‏ @tymoignee

3-the gov usually must be in deficit because other sectors want to be in surplus 4-public debt can always be serviced & will never be repaid

Eric Tymoigne‏ @tymoignee

5-fear waste, regulatory capture, cronyism. don’t fear monetary financing. 6-Aim at a gov of the people, by the people, for the people.

Oharra: Moneta erabiltzaileko gobernua, kasu, euroguneko herrialde kideen edozein gobernu, moneta jaulkitzailea Europako Banku Zentrala da. Herrialde kideek ezin dute moneta jaulki.

Kasu hau sakonki ikusi dugu blogean. Erantzunik dotoreena Warren Mosler-ek eman du: ikus Options for prosperity – Warren  Mosler (for ICEC – Basque Countries), in From Vocale Europe to ICEC-Euskal Herria.

Iruzkinak (1)

  • joseba

    Fiat-eko sistema monetarioaz

    Wouldn’t it be great if America had a fiat-money system?

    ( http://neweconomicperspectives.org/2017/11/wouldnt-great-america-fiat-money-system.html)

    By J.D. ALT
    Think of how many of our seemingly intractable local and national problems could be solved if only America had its own sovereign fiat-money system! Unfortunately, most Americans can’t even think about that question because they’ve never heard a proper explanation of what “fiat-money” actually is. Here, then, is quick solution to that problem:
    How an American fiat-money system would work (in eight easy steps):
    1. The sovereign U.S. government declares that every citizen and business must, on a regular and recurring basis, pay taxes to the government (or incur a harsh penalty).
    2. The government next declares that the only thing it will accept as a tax payment is a particular kind of “fiat-money” which only the government, itself, shall have the right to issue (which is why it’s called “fiat-money”).
    3. After these declarations, U.S. citizens and businesses find themselves, instantaneously, with a strong desire to acquire the government’s fiat-money to avoid the harsh penalties of being tax delinquent.
    4. In order to satisfy this desire, the government then exercises its declared right and issues the fiat-money—either electronically or with a printing press—and then spends the fiat-money into the private economy so the citizens and businesses can acquire it.
    5. The sovereign government can spend its created fiat-money into the private economy in three ways:
    1. It can directly purchase goods and services from the U.S. citizens and businesses. The government could, for example, purchase the services of the citizens to build a highway, or a bridge—or it could pay the citizens to teach children to read.
    2. The government can mail a check, or electronically deposit fiat-money directly into the bank accounts of citizens who, because of disability or old-age, are unable to work to obtain the fiat-money they need.
    3. The government can direct its central bank (which manages the creation of the fiat-money) to automatically, at the end of each business day, issue and make available to the private banking industry whatever new fiat-money is necessary to monetize the profits private industry has generated during that business day.
    6. After it has spent enough of its fiat-money into the private economy, the government then makes good on its declared intent: it collects taxes from the citizens and businesses. Now they know the government means business, and will continue to want to earn the fiat-money it issues so they can pay their taxes next time around as well.
    7. The difference between the amount of fiat-money the government issues and spends and the amount of fiat-money it collects in taxes would be called the “Citizen’s Net Gain” (CNG)—because it is the amount of fiat-money the citizens get to keep after they’ve paid their taxes.
    8. If the citizens and businesses begin to acquire more CNG fiat-money than they know what to do with, that could cause the price of everything in the private economy to go up—inflation—which, if not controlled, is undesirable and destabilizing. The sovereign government can control this inflation by a combination of three strategies:
    1. It can increase the amount of fiat-money it collects in taxes, thus draining more of the excess CNG out of the economy.
    2. The government can create special interest-bearing savings accounts which the citizens and businesses can put their excess CNG into, thus removing a large quantity of fiat-money from chasing goods and services, and replacing it with a much smaller quantity of fiat-money (the interest payments on the savings accounts).
    3. The government can direct its central bank to discourage the borrowing of money through the banking industry, which will reduce the amount of private sector profits needing to be monetized.
    That’s it. Those eight steps would be the basic workings of an American fiat-money system.
    Now that it’s been properly explained, just imagine for a moment what this fiat-money system is able to do. If you’re a business, the system can create fiat-money, as needed, to monetize your profits. If you’re a citizen, the system can create fiat-money to pay you to provide all kinds of useful goods and services to your local community. If you’re a politician, you can propose the government should undertake the accomplishment of some grand and important task—such as providing every citizen with a free and complete education, or providing every citizen with free health-maintenance—without having to explain “how you’re going to pay for it,” because issuing and spending fiat-money for those kinds of things is what the sovereign government is supposed to do in order for the fiat-money system to properly work. It really does send tingles of exciting possibilities up and down your spine, doesn’t it?
    But now let’s stop day-dreaming. Let’s wake-up to the hard-nosed reality that the American fiat-money system we’ve just imagined is…—wait a minute! It’s the American fiat-money system we already have! The only difference between the money system we’ve imagined and the one we are actually using is the terminology we apply to it. We call the government’s particular fiat-money “U.S. dollars.” We call the “Citizen’s Net Gain” our federal budget “deficit.” We call the savings accounts the government makes available to citizens and businesses “Treasury bonds”—and we imagine the government is “borrowing” the dollars being deposited in them. Finally, we call the amount of fiat-money that has been sequestered in the Treasury bond savings accounts our “national debt.” Other than these minor differences in terminology, our American money system is exactly the fiat-money we’ve just imagined.
    The terminology differences, however, have an extraordinary impact: They make it extremely difficult, if not impossible, to rationally use our fiat-money system to accomplish the things we need accomplishing. It’s like trying to drive a car with all the pedals mislabeled and the steering gearbox turned upside down: the accelerator is called the “brake,” the “brake” is called the accelerator, if you turn the steering wheel counter clock-wise, the car veers to the right, if you push the gear shift to “D,” the car shoots backward. And meanwhile, the backseat is filled with car-experts and pundits explaining why all the misleading labels are correct, and how everything is supposed to work in the confusing, dysfunctional way that it does.
    To restate my opening question, then: Wouldn’t it be great if we had an American fiat-money system that our politicians and economic pundits actually knew how to drive?

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