Brendan Greeley-ren America has never worried about financing its priorities
(i) Datua: AEB eta zorra1
Whee!
Segida2…
(ii) DTM: ez marxismoa, ezta txorakeria ere3
(iii) DTM eta Washington, D.C.4
Segida5…
(iv) Alexandria Ocasio Cortez delakoaz6
*Modern monetary theory has the least Marxist origin story of any concept in the history of human thought. According to Warren Mosler, credited with inventing it, the idea came “after spending an hour in the steam room with Don Rumsfeld at the Racquet Club in Chicago.”
Iritzia:
Editor’s picks
Excellent report and thanks for the mention!
Let me state that you need to omit the word ‘only’ as there are numerous other reasons for what is called “inflation” in addition to what you described:
“Modern monetary theorists argue that inflation happens only when the real economy — plants, machines, workers — can’t absorb what the government is spending.”
Also, for the record, I met with Don Rumsfeld seeking guidance on promoting the understandings. He directed me to Art Laffer’s firm where I worked with Professor Mark McNary to write ‘Soft Currency Economics’. My 2010 book ‘The 7 Deadly Innocent Frauds of Economic Policy‘ is free online at www.moslereconomics.com
And for those interested, core understandings include:
1. The currency itself is a state monopoly, and monopolists are necessarily ‘price setters’.
2. The ‘money story’ begins with a state desiring to provision itself.
3. Taxation by design functions to create sellers of goods and services (unemployment) seeking the state’s currency in exchange to avoid tax penalties. The state can then provision itself with its otherwise worthless currency.
4. The state (or its agents) is the single supplier of that which it demands as payment of taxes.
5. Therefore the state, from inception, necessarily spends first, after which tax payments are made and state securities paid for.
6. The public debt is nothing more than the funds spend by the state that have yet to be used for tax payment, and remains outstanding as the ‘net money supply’ in the form of cash, balances in reserve accounts at the Fed, and balances in securities accounts at the Fed until used to pay taxes.
By Warren Mosler
1 Ingelesez: “There is nothing inherently socialist about government debt. A government can issue debt to pay for whatever it likes. It can pay to fight a war, to lower taxes for a preferred group, to soften the sharp edges of a recession. The United States has, in fact, issued debt to pay for all of these things. American politicians say that public debt crowds out private investment, that it’s unsustainable and will turn the country into Argentina. Or Greece. Or now Venezuela. But regardless of what they say, what American politicians do is vote for more debt.”
2 Ingelesez: “Americans are just fine with debt. When they fight about it, they’re actually negotiating in code over something else: what programs are so important that it doesn’t matter how you pay for them?
A little more than a month ago, Howard Dean had breakfast at the Hotel Vermont in Burlington with Stephanie Kelton. Mr Dean has served as Vermont’s governor, a candidate for President, and head of the Democratic National Committee. Ms Kelton, who teaches economics and public policy at Stony Brook University in New York, is the best-known advocate for modern monetary theory, a way of looking at how governments spend money. “I expected some semi-Marxist bullshit,” says Mr Dean, “but she’s a real thinker.“”
3 Ingelesez: “Modern monetary theory is neither Marxist*, nor bullshit
Allow us to grossly simplify. Advocates for modern monetary theory argue that, for a sovereign country with its own currency, there is no inherently unacceptable level of government debt — that country does not automatically begin to collapse when debt reaches 90 per cent of GDP, or even 200 per cent of GDP. The country appropriates what it believes is necessary for domestic programs, regardless of revenue.
A traditionalist would see this as a prescription for inflation: increase the supply of money and, as with any commodity, you reduce its value. Modern monetary theorists argue that inflation happens only when the real economy — plants, machines, workers — can’t absorb what the government is spending. So: disconnect spending from taxation. Spend until the economy is at capacity, using all of its resources perfectly. Raise taxes only to cool down inflation, when the real economy exceeds that capacity.
Alphaville does not propose here to mount an extensive defense of modern monetary theory. There is not the space. (Will there ever be?) We are confident, however, that Howard Dean is correct. It is neither Marxist, nor is it bullshit.
Modern monetary theory is simply a different way of looking at fiscal policy, a way of describing what the real-world constraints on spending look like. It is in fact very close to how people in Washington, D.C. already approach spending. Again, we’re not talking about what they say. Rather, we’re talking about what they do.”
4 Ingelesez: “Modern monetary theory is similar to the way Washington, D.C. already thinks
The United States Congress spends money on stuff it thinks is important. Over the last four decades, it has only once matched that spending with taxes, in the late 1990s. And that decision didn’t come from any moral or theoretical aversion to debt. It came when the cost of maintaining that debt started to look scary. Since then, interest on US debt has steadily dropped, and the US Congress has spent steadily more.”
5 Ingelesez: “Like modern monetary theorists, Congress already appropriates away until it reaches real-world restraints on how much it can spend. It just hasn’t reached any for almost the last two decades. When Washington wants something — to fight a war, to cut taxes — it appropriates. And so arguments about balancing budgets aren’t actually about constraints. They’re about priorities. Important programs get appropriations, full stop. Unimportant programs need to be paid for with taxes.
Or, in Washington: “We can’t afford that” actually just means “I don’t think that’s very important.”
Alphaville doesn’t want to be disingenuously bipartisan, here. Republicans, who appropriate regularly and wildly without concern or revenue, are basically already in the closet on modern monetary theory. Democrats chose to offset their 2010 signature healthcare program with taxes, and are even now arguing over a rule in the House of Representatives that would balance new spending with new revenues. But they may be modern monetary theory… curious.
Which brings us back to Howard Dean’s breakfast with Stephanie Kelton.
As governor of Vermont, Mr Dean had an almost punitive reputation for balancing the state’s books. Right now, he’s interested in forgiving student loans, which according to the New York Fed totalled $1.4tn [amerikar trilioia, tn = europar bilioia] at the end of last year. (For comparison, the Congressional Budget Act estimates the ten-year cost of the 2017 tax cut at $1.9tn.) And so, on the sidelines of The Gathering, a kind of Bernie Sanders festival, the donors Steven Swig and Mary Green Swig introduced him to Ms Kelton.
“I’m seriously considering changing my world view,” he says. “I’ve always said you manage debt by limiting the amount of it.” Now he has a set of questions for other economists: How much debt is OK? How significant is it that other countries need to hold US debt as a reserve currency? How long does that privilege last, he wonders, and how much is it worth? These are questions about the real constraints on US spending.”
6 Ingelesez: “The part where we make sure to mention Alexandria Ocasio Cortez
Last week Alexandria Ocasio Cortez, the already ubiquitous freshman House member from the Bronx, endorsed modern monetary theory in an interview with Business Insider. She is more explicit than Mr Dean about the political value of thinking differently about debt. She is often asked how she will pay for her programs, and responds by rephrasing the question: how does anyone pay for anything?
Ms Ocasio Cortez has gifts as a communicator, and like Mr Dean is an important convert. Neither is House leadership, or even Democratic party leadership. But they have arrived at the same argument. They are on to the game of how the United States already spends money. That will change the fight over what it spends money on.”
