Warren Mosler
@tobararbulu # mmt@tobararbulu
The Left is Wrong On Debt and Deficits
ooo
The Left is Wrong On Debt and Deficits
(https://www.youtube.com/watch?v=lGhF1jO4ZbM)
Warren Mosler, father of Modern Monetary Theory, speaking with Steve Grumbine of Real Progressives, discussing how the “headline” leaders of the Left continue to approach government debt and deficits incorrectly. They have erroneously conceded that there is a long-term debt/deficit problem that need to be addressed, but usually simply say that we should do it later.
The fact is that this is completely wrong. The US government is monetarily sovereign (meaning it issues its own currency, has a floating exchange rate, and has no foreign-denominated debt), and therefore there’s no such thing as a long-term debt problem. The debt is nothing more than dollars previously spent by government, which have not yet been used to pay taxes. These get converted from reserves (which are basically checking accounts at the Federal Reserve Bank) into Treasury Bonds (which are basically savings accounts at the Federal Reserve Bank), because savers holding them desire to earn interest on them, and government makes a policy choice to accommodate this desire and pay that interest. There is no possibility of government going “bankrupt,” or being unable to spend, or being forced to raise taxes on account of any ratio of outstanding Treasury Bonds to anything else.
The only possible problem from deficits is inflation: if government tries to buy more than the economy can produce, then this will only push up prices, causing inflation. So if you want to make the case that there’s a long-term deficit problem, the burden of proof is on YOU to show that there’s an expected future inflation problem. However, all of the inflation forecasts we have today (which include the Federal Reserve and Congressional Budget Office projections, as well as free-market expectations as measured by the price of TIPS) show inflation of no more than 2% out for decades. This means that there is absolutely ZERO evidence that there’s a long-term deficit problem. So if you believe that there is, (and who knows, maybe you’re right) you’ve got to show why all of these inflation forecasts are wrong.
To read Mosler’s article “Modern Monetary Theory: The Last Progressive Left Standing,” go here: https://www.huffingtonpost.com/warren…
Transkripzioa:
0:00
there’s a couple things you can do so
0:02
one thing is you can say well let’s look
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at where the money comes from where does
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the money come from
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okay now you see you have an account
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online don’t you usually say yes so they
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know it this so you can pick up your
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computer screen and you’ve got three
0:16
thousand dollars in your account well
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what does that mean you look at your
0:19
screen and says three zero zero zero all
0:22
right and now like for me my social
0:25
security checks coming in I’ve got two
0:26
thousand dollars it’s going to hit and I
0:28
watch my screen I watch and I watch it
0:30
all of a sudden
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britta you know their hosts hair on well
0:36
I just got paid my two thousand dollars
0:38
well what did the government actually do
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okay all they did was change the number
0:43
on your screen from 3 to a 5 they left
0:46
the three zeroes alone they changed it
0:48
three to a five okay they just changed
0:50
your number from a low and over to a
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higher they get anybody’s tax when you
0:54
shove it into a computer they didn’t
0:56
take gold coins of shovin
0:57
it just changed numbers and that’s what
1:00
they always do that’s where the money
1:01
comes from then I tell the story about
1:03
in the late 70s I was at Leigh Blair a
1:06
company and my back office guy called me
1:08
up he said the Federal Reserve made a
1:10
mistake they were supposed to give us 30
1:12
thousand instead they gave us 300
1:14
million it’s like great let’s take let’s
1:17
get out of here and get it all in $20
1:19
bills were gone and that’s what happened
1:21
he said well they had those calculators
1:25
back then they had zeros double zeros
1:27
and triple zeros on them and he
1:28
accidentally hit the triple zero instead
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of the double zero in singles there or
1:32
something
1:32
he gave us three hundred million seven
1:34
thirty thousand dollars okay that was
1:36
good money we could have gone and spent
1:37
it if he had caught his mistake two
1:39
hours later he came back and changed her
1:41
number to what it was supposed to be
1:43
forget what he did so the artist so
1:46
where did the money come from
1:47
we’re not 300 million real dollars come
1:49
from that was just like any of them came
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from the guy’s thumb you know so all of
1:55
all the dollars come from the guy’s
1:57
thumb at the Federal Reserve when he’s
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crediting accounts he didn’t like tax
2:02
anybody for that money he didn’t borrow
2:03
it from China
2:04
he just treaded it to my account that’s
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where it comes from and when you pay
2:08
taxes what happens well they change your
2:09
number down there just scorekeepers and
2:12
it’s like if you’re keeping
2:13
scorecard game finding a scorekeeper how
2:15
many points do I have well I don’t have
2:18
any points well then how do I give you
2:21
100 points if you have a good hand where
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do I get them I don’t I just changed the
2:24
number and your score in your account
2:26
and if I give you a hundred points do I
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have a hundred points last no I’m just a
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score keeper I’m just changing your
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numbers up and down and do I have to
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take points from somebody else to give
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them do you know okay so the government
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can do this they contain they can’t the
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only way they spend – it’s not like a
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new way to spend money it’s the only way
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they spend money there’s no other way to
2:47
do it and so they just changed numbers
2:50
and the constant change them up and they
2:51
change them down and a guy at the
2:52
Treasury changing numbers upward he pays
2:54
people he doesn’t even know the phone
2:56
number of the email the guy at the IRS
2:58
changing numbers down there’s no
3:00
connection there’s an accountant in the
3:02
middle who decides whether there’s been
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a surplus or deficit all he does is
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subtract the two numbers and he makes an
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announcement there isn’t anything else
3:09
except it’s just a big record-keeping
3:11
exercise okay so maybe you have to start
3:14
with something like that to talk to
3:18
people and then the next thing they’ll
3:19
move into is inflation say oh well if
3:21
you just keep giving people everything
3:23
you know the money’s gonna be worthless
3:24
and you agree you say yes of course but
3:26
that doesn’t mean that’s not how it’s
3:28
done
3:28
and so when Bernie Sanders says Medicare
3:31
for all is gonna cost a trillion dollars
3:33
where are we going to get them and
3:35
somebody says we were gonna get the
3:36
money you tell them we’re just gonna
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change the numbers in people’s accounts
3:39
that’s where the money comes from when
3:41
Medicare makes a payment they change the
3:43
number and somebody’s back income how
3:45
does the government can pay for it we’ve
3:46
got a credit a bank account we’re gonna
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change the number to a higher number is
3:50
that gonna cause a problem well maybe
3:52
and if it is we’re going to deal with it
3:53
is Medicare for all changing all those
3:56
numbers is gonna cause inflation well I
3:58
don’t know what it Bernie say did Bernie
4:01
say look you know this all the spending
4:04
on Medicare is gonna cause inflation so
4:05
now we’re gonna have to tax to take some
4:07
money away so there won’t be inflation
4:08
no he did say that he said we have to
4:11
get the money to be able to pay for it
4:14
and that’s a raw and be highly
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misleading as to how you can have
4:18
problems and seeds the major obstacle is
4:21
why we don’t actually have Medicare look
4:24
we both want Medicare flaw
4:26
okay and if it was going to create an
4:28
inflation problem we’d be out there
4:30
talking about that just as much as
4:31
anybody else but what we can show is
4:33
it’s probably not this probably going to
4:35
be the opposite it’s probably going to
4:37
cause prices to go down and not off in
4:39
which case there’d be no point in taking
4:41
money from anybody to pay for it now if
4:44
you want to take away money from the
4:45
rich for social equity purposes fine you
4:47
know we can talk about that but don’t
4:50
tie it to paying for Medicare because
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then we don’t get Medicare for all which
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is exactly what happened okay that
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mistake that mistaken understanding is
4:59
what kept it away from us now which side
5:00
of this argument are you want if you
5:03
want to get Medicare if you don’t want
5:05
to get if it’s not causing a problem do
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you want to you know create the illusion
5:09
that is creating a problem so that we
5:11
don’t get it you know what kind of like
5:13
what kind of progressive is that why
5:15
would you undermine your own agenda for
5:17
something that’s not the case so I don’t
5:19
know I know we could talk about yes it
5:22
was like in 2010 he has a fantastic
5:25
article called you know the last
5:28
progressive standing and and it was
5:30
really about this whole debt and deficit
5:33
height that is going on today the left
5:37
is not learn their lesson and and I’ve
5:40
been quoting you like crazy because I
5:42
love it the headline left has failed
5:45
progressives mightily and yes talk about
5:48
how the headline left including Bernie
5:50
Sanders have really done us no favors
5:54
yeah so us you know Bernie Sanders is
5:57
the most immediate when I wrote that it
5:59
was something like 2010 and so there are
6:01
others that were more topical at the
6:03
time that I was meeting today but the
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Bernie Sanders chart has a lot of
6:07
meaning if he came out with Medicare for
6:09
all which of course is something every
6:11
progressive would support but then you
6:15
know he puts on his big whopping multi
6:16
trillion dollar tax to pay for it and I
6:20
had talked to Stephanie at the time
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stephanie kelton his was chief economist
6:25
for the Senate Budget Committee which is
6:27
Bernie Sanders committee so that she was
6:30
his economist you know like he’s
6:33
Medicare for all is a deflationary event
6:36
you’re going to save a trillion dollars
6:38
in expense for the country
6:39
that’s going to mean trillion dollars
6:41
worth of salaries basically those people
6:43
are going to be losing their jobs and
6:45
when you’ve got unemployment going up
6:46
and well I ever get demand from that you
6:49
know raise taxes because since this is
6:52
stupid because some what fiscal policy
6:55
is all about you’d either be increasing
6:56
public services like including free
6:59
education to pay for it rather than
7:01
raising taxes well they ate you know the
7:05
answer I got from the Sanders camp was
7:07
Ronnie Murray said he says I’ve been a
7:09
fiscal conservative all my life and I’m
7:12
not going to change now and so I’m gonna
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come up with a way to pay for it so it
7:15
comes up this big whopping tax and
7:17
Hillary Clinton points to it says see
7:20
this just proves we can’t afford
7:22
Medicare for all it’s like Santa Claus a
7:26
hollow and we’re burning as we know were
7:28
the adults in the room and so uh you
7:31
know we’re gonna have to do the
7:32
Obamacare and patch or something like
7:34
that okay so here you have Bernie
7:37
Sanders who’s a headline left for this
7:39
particular issue you’ve got it all wrong
7:42
and he did the issue you know the damage
7:45
that killed it yeah he’s the one killed
7:47
it with his own you know mistaken tax
7:51
hike that he thought had to go with it
7:53
and so here we are
7:55
best progressives losing the issue
7:56
because the headline left can’t support
7:58
their own policies properly they don’t
8:01
understand the monetary system ail
8:02
understand monetary and fiscal policy
8:05
and they they botch it they’ve been
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doing this every single time for the
8:09
last at least ten years and at some
8:14
point it’ll almost wonder if it’s by
8:16
design if they’re really not
8:18
left-leaning people if they’re really
8:20
not progressives but they just do it as
8:23
people like Paul Krugman has been doing
8:25
it for a long time and even Dean Baker
8:27
who’s I think is laughed I mean seems
8:31
sincere enough to me and so you’d have
8:33
to you know you know you just it’s
8:36
discouraging to see the damage being
8:39
done by the by the left and not by the
8:41
right the right supposed to take that
8:42
other side now that the budget deficit
8:44
itself is another big issue in the
8:47
headline from left is what’s killing us
8:49
the the headline the left will say yes
8:52
we need a fiscal adjustment
8:53
short term but in the long term we have
8:55
a long-run deficit probably have a
8:57
long-run entitlement problem we have to
8:58
do something about it
8:59
right now we have to go the other way
9:01
well once they’ve conceded that there’s
9:03
a long-term deficit problem and
9:05
al-monitor entitlement problem they’ve
9:08
lost the short-term bet so yeah we tried
9:10
that under British rule out the debt and
9:12
like all we got was more debt we still
9:13
have the long term problem okay well
9:16
when the fact is that we don’t have a
9:20
long-term deficit problem and in the way
9:22
they’re they’re thinking about a long
9:25
term deficit problem there’s no such
9:26
there’s no such thing as a long term
9:27
deficit the only possible long-term
9:29
deficit problem would be an inflation
9:31
problem and Bernie Sanders did not score
9:34
Medicare for on an inflationary basis he
9:37
didn’t say Oh Medicare for all is going
9:39
to cause inflation unless we increase
9:40
the tax so we have to increase the tax
9:43
reduced aggregate to me instead scoring
9:45
Medicare for all probably would have
9:47
shown strong deflationary forces and
9:50
would not have called for it okay so and
9:53
I had a discussion with Professor
9:56
Michael Woodford who’s you can’t get
9:57
much more mainstream than that his named
10:01
the number one economist in the world
10:02
the top influence of all the central
10:03
factors very nice man very sincere and I
10:08
said Michael what the only possible
10:10
long-term deficit problem would be a
10:11
long-term inflation problem the
10:13
government’s dr. Bob’s cheques or
10:14
anything like that he’d stop for at the
10:17
most 10 seconds and said yeah of course
10:19
you know you know the credit accounts I
10:21
said okay so the only way we can so you
10:27
know since the only way we can have a
10:28
long-term inflation problem is if we
10:30
have a long-term deficit problem what we
10:31
do to see if we have a lot of term
10:32
deficit problems as we look to the
10:34
long-term inflation forecast so you go
10:37
to the Fed the CEO and precious
10:39
free-market Treasury index bonds market
10:42
it right and they’re all two percent or
10:44
less so all these mainstream headline
10:48
forecasts and markets are screaming out
10:51
there is no long-term inflation problem
10:53
even with the debt being 77 percent of
10:55
GDP and Medicare is going to be honored
10:57
and 75 percent of the budget and
10:59
whatever all this you know all these
11:02
forecasts a financial or whatever they
11:05
come again or whatever the
11:07
like this it doesn’t show up in the
11:08
inflation forecast which means yes the
11:11
spending might be that high but there’s
11:12
not going to be any shortage of demand
11:13
and we can actually in real terms of
11:16
Florida hopeless at this point time
11:17
given no change okay and so if anybody
11:21
says to me there’s a long-term deficit
11:23
problem I say okay maybe but the burden
11:25
of proof is on you to show me that these
11:28
inflation forecasts are wrong you have
11:30
to show me that the Fed the CBO and the
11:33
free-market Treasury tips now maturity
11:36
test free market breaking inflation it
11:39
is wrong and then I’ll listen to you too
11:42
but until then I’ve got that on my side
11:44
okay that’s all you have to do it so why
11:47
would any progressive ever concede this
11:49
400 deficit bubble when the other side
11:52
can’t even begin to to to like you know
11:56
show that those forecasts are wrong show
11:58
that there is a long-term deficit
11:59
problem but by conceding if they’ve
12:01
taken away the victory right there
12:03
there’s all
oooooo
@tobararbulu # mmt@tobararbulu
Government Spends First, THEN Borrows
youtube.com
Government Spends First, THEN Borrows
Warren Mosler, one of the fathers of Modern Monetary Theory, explaining the logical sequence of gove
ooo
Government Spends First, THEN Borrows
(https://www.youtube.com/watch?v=f6rO9G_qEac)
Warren Mosler, one of the fathers of Modern Monetary Theory, explaining the logical sequence of government spending. To get the currency system going, the government first imposes a tax liability on the population, which can only be paid using the government’s IOUs. Now the citizens need the government’s IOUs in order to pay the tax. How can they get those government IOUs? They can work for the government. That’s why the government is doing this: to transfer real resources (labor and goods and services) to the public purpose.
If the government imposes a tax of, say $10, then it must spend at least $10 (a balanced budget), or else the citizens won’t be able to pay the tax, because they won’t have enough dollars. That means there will be involuntary unemployment, as people look for paid work but are unable to find it. What if some people want to save dollars? The government will then have to spend more (a deficit); it will have to spend enough for citizens to be able to pay the tax and meet the desire to save, or else there will be involuntary unemployment.
Since the government is the issuer of the dollar, it cannot receive tax payments before it spends, because spending is how it gets the dollars out there. So the cycle goes like this: the government spends first, and then later receives those dollars back in taxes or “borrowing.”
That means the money the government “borrows,” (aka the national debt) is only money that it has previously spent, that it is borrowing back! Why is it doing that? The reason is purely historical: under the gold standard, if the government “borrowed” money from you, by selling you a Treasury Bond, then you wouldn’t be allowed to convert that Treasury Bond into gold, whereas you would be allowed to if you held currency. So if the government was scared that it was running out of gold, it could start borrowing more from the citizens, to prevent them from converting to gold. But today, it serves little purpose, other than to provide savers a way to earn risk-free interest on their savings.
See the whole video here: 
• Warren Mosler’s Soft Currency Economi…
Transkripzioa:
0:00
and to explain this I would take out I
0:03
started off the same way and I said
0:06
anybody want a job that pays in my
0:08
business cards and I said I hope you
0:10
have enough sense not to take it because
0:11
these things are worth nothing right
0:13
you can check eBay they are worth
0:15
nothing okay I said but so now I can’t
0:19
hire anybody with you but now I’m gonna
0:21
tell you there’s one more thing going on
0:22
there’s only one door out of here
0:24
there’s a guy there with a 9-millimeter
0:25
he works for me
0:26
and you can’t get out of here without
0:28
one of these cards now you’re all
0:30
unemployed now you’re all looking for
0:33
paid work in this card and you can’t
0:34
find it because there isn’t any way to
0:37
get these cards now I offer you all a
0:40
job if you stay afterwards for ten
0:42
minutes and help clean the room I clean
0:44
up the room polish the floor
0:45
I’ll pay you one card for working ten
0:48
minutes okay
0:50
now you will all now you all now I can
0:53
spend these otherwise worthless cards
0:55
right you need them to pay the tax to
0:58
get out of the room okay now let’s say
1:01
there is 50 people in this room and I
1:05
decide I’m only gonna spend 40 cards 10
1:10
you guys aren’t gonna be able to find
1:11
work you’re gonna be unemployed okay and
1:15
let me show you something else I’ll show
1:17
you that see the back of this card
1:18
there’s no gold behind this card okay
1:21
but you’re still willing to work for it
1:23
even with no gold behind it why because
1:25
you need it pay the tax and you are
1:28
unemployed so now there if I if there’s
1:36
50 people I only spend 40 there are
1:38
gonna be 10 unemployed at least somebody
1:41
might earn more than one but they’re
1:42
gonna be at least ten unemployed and
1:44
there’s not no possible way they can get
1:46
a job no matter how many structural
1:49
reforms I make no matter what level of
1:52
education they might be you might all
1:54
have advanced degrees in cleaning the
1:57
floor okay but you’re still not gonna be
2:01
able to get a job that would be better
2:02
if you did I’m gonna have a better floor
2:04
from those forty people working and 10
2:06
others breathing down their neck but
2:07
it’s not gonna solve unemployment now
2:12
why else
2:14
what might you want this card you might
2:17
want to save one people walk around with
2:19
cash in their pockets now why would any
2:22
of you want to save one well maybe you
2:25
want to take one home to prove to your
2:27
husband or wife that you were actually
2:28
in an economics lecture so let’s say you
2:31
all decided you know you wanted to save
2:34
one card well now when I offer jobs I’m
2:38
gonna spend at least a hundred cards
2:39
because you’re all going to have one to
2:41
pay the tax and one to save right take
2:44
home to prove you are here what if I
2:47
only decide to spend ninety unemployment
2:53
why because I’m not spending enough to
2:56
cover the need to pay the tax in the
2:58
need to say is there any other possible
3:01
reason
3:02
there could be unemployment and the
3:03
answer is no okay so you got the
3:07
government the United States government
3:11
taxes three trillion dollars spend
3:15
actually two three and a half this year
3:16
taxes three and a half trillion dollars
3:19
spends four trillion dollars it’s spent
3:22
five hundred billion dollar deficit it’s
3:24
spending more than its car collecting
3:28
right there’s still unemployment what
3:31
does that mean it hasn’t spent enough to
3:34
cover the tax bill in the need to save
3:35
the problem we needed to spend five
3:38
trillion to cover all the savings
3:40
desires to not have the unemployment
3:43
okay so the point is unemployment is
3:48
always in necessarily a case where the
3:55
government has not spent enough of its
3:56
currency to cover the tax bill in the
3:59
need to save because it means there’s
4:01
still people willing to work for that
4:02
thing to get out of here now the answer
4:06
to that is either to spend more attacks
4:08
less xeni that’s a political decision
4:11
all right but that’s always going to be
4:13
the case so
4:20
that is like the basics of the whole
4:24
thing now I’m going to give you a couple
4:26
of things that follow from this for
4:28
example why was I why was my guy
4:30
collecting cars so I could get them to
4:33
be able to pay you know I have to pay
4:36
you first and then collect the cards
4:38
it’s impossible for the other way around
4:40
okay just like a football stadium they
4:43
have to get the tickets out there before
4:45
they could collect them they don’t
4:46
collect the tickets first and then sell
4:47
okay it’s backwards now if you could in
4:51
the old days when we used to live in New
4:52
York and there were subway tokens the
4:54
guys were selling them and people were
4:55
dropping them in the thing you could
4:57
watch them going around and Romney say
4:58
oh I see how it works first they collect
5:01
the tokens then they sell but the New
5:03
Yorkers you know we’d say no huh
5:05
first they sell them then they collect
5:07
them well you can’t tell by watching
5:09
them go around every congressman says we
5:12
have to get the dollars first before we
5:14
can spend we got to get them through
5:16
well we don’t get through tax thing we
5:18
have to borrow from China and leave the
5:19
debt to our grandpa
5:20
they got it backwards they spend first
5:23
and then they borrow it has to be
5:26
there’s no other way to do it so again
5:29
for the analogy I’ve got my cards I pay
5:32
you first you pay the guy I pay you
5:34
enough to save if I was a government I
5:36
would then borrow back your savings the
5:40
money I just spent first I the
5:42
government they don’t actually give you
5:43
cards right
5:45
they credit your account and then they
5:47
borrow the same dollars they’re just
5:49
stuck in your account at the Fed put
5:51
them in another account called the
5:52
Treasury security as securities account
5:54
and that’s called borrowing money so I
5:56
give you each you turn 50 cards to pay
6:00
the tax another 50 to save and I say
6:02
wait a minute
6:02
I’ll hold those cards for you in a
6:04
different account over here called the
6:06
Treasury security they’ll pay you some
6:07
interest in more cards now would you
6:10
mind doing that you know I’ll send a
6:12
note to your husband or wife so you can
6:14
still prove you’re here right you bring
6:16
home the bank statement okay and would
6:21
you do that well most people would do
6:22
that let’s assume you do that some
6:25
people hold cash but most people would
6:26
want the money in the bank or in a
6:27
Treasury security okay that’s the
6:29
government then oh why do they do that
6:30
do they do it because do I do that
6:32
because I need to
6:32
get your cards to Bombeck so that I
6:34
could spend enough the reason actually
6:38
is Benna lost
6:41
it’s an anachronism back to the gold
6:43
standard under the gold standard the
6:45
initial cards had gold on the other side
6:48
the money was convertible into gold into
6:50
Treasury but if you bought Treasury
6:52
securities you couldn’t convert it into
6:54
gold until after they matured so rather
6:57
than have the whole gold supply at risk
6:59
the government would issue bonds and
7:01
then the gold is safe at least for a
7:03
while and then when people wanted to
7:04
cash their money in they have gold for
7:06
that they have liquidity okay and the
7:08
same with any fixed exchange rate Hong
7:10
Kong right now fixed exchange rates
7:12
I think Bulgaria fix exchange okay but
7:15
for the United States today it’s
7:17
entirely inapplicable
oooooo
@tobararbulu # mmt@tobararbulu
How Could Euro Nations Start A New Currency?
ooo
How Could Euro Nations Start A New Currency?
(https://www.youtube.com/watch?v=V2iBD1x5ofw)
Warren Mosler, father of Modern Monetary Theory, answering a question about how a Euro country could switch to its own currency. Mosler outlines the steps that would be involved. In Mosler’s proposal, the government would simply switch its taxing and spending to the new currency, without forcing anybody to convert their savings, and without trying to convert the existing Euro debt.
Note that at 3:26, Mosler says “Lira debt” when he should have said “Euro debt. “
Transkripzioa:
0:00
okay like most things there is a right
0:03
way and a wrong way to do it yeah there
0:05
are two things number one you don’t
0:07
actually leave the euro what happens is
0:10
the government simply starts taxing and
0:13
spending in a new currency and let me
0:15
call it new lira so if the tax used to
0:19
be 5,000 euro it’s now 5,000 lira if
0:22
somebody salary used to be 40,000 euro
0:25
it’s now 40,000 lira so the government
0:28
doesn’t leave the euro it just changes
0:30
its tax policy so it’s taxing in new
0:32
lira and it’s changes its spending so
0:35
it’s spending in new lira and then the
0:39
deed is done now you have an independent
0:41
fiscal policy you have independent
0:42
monetary policy you have everything at
0:45
hand to have a strong prosperous economy
0:47
going there’s one very important thing
0:50
that I emphasized and that is it’s
0:52
important not to convert people’s bank
0:55
deposits from euro to lira if people
0:58
want to have euro in the bank deposits
1:00
just leave them alone most of the other
1:03
plans I’ve saw involved forced
1:06
conversion of euro into lira and I’m
1:09
just categorically against that and so
1:12
the easiest way to understand is let’s
1:15
assume half the people in Italy would
1:18
like to keep their euro and the other
1:19
half need lira because it’s a new
1:22
currency to run their business their
1:23
life and they don’t pay all their
1:26
expenses put the kids through college
1:27
whatever and so half the people want to
1:32
keep the euro the other half don’t want
1:34
euro anymore they want to do lira if you
1:36
convert everybody to lira now those
1:39
people who wanted euro are very unhappy
1:41
so number one you’ve got a lot of
1:43
unhappy people number two what they do
1:45
is they’ve got this lira they don’t want
1:47
so they go out and try to sell it to buy
1:49
their euro back which is what they
1:51
actually want and so what happens is the
1:53
currency drops precipitously I mean you
1:55
can drop 40 50 60 % because all these
1:58
people are selling their Lehrer they
2:00
don’t want to try and buy euro so lira
2:02
by euro and the central bank doesn’t
2:05
know what to do so they wind up raising
2:06
interest rates and people and imported
2:09
prices go up by 50 percent or more
2:12
people who are on fixed incomes are
2:13
destitute in the streets and the
2:17
government doesn’t know how to deal with
2:18
it and you wind up getting a collapse of
2:20
the government and we’ve seen this
2:21
happen many different places in the
2:23
world where they do a conversion they
2:24
force conversion of the currency and the
2:27
currency collapses and the government
2:29
fails okay now on the other hand if you
2:32
just leave everybody in Euro what
2:34
happens well now people who want your
2:37
I’ve got them so they’re up there
2:38
they’re happy the people who have yura
2:40
that want lira they have to sell their
2:42
euro to buy the new lira sell euro buy
2:45
the lira now you have a strong currency
2:47
well where are they gonna get two new
2:49
lira nobody has any it’s brand new
2:51
they’re spending a little bit in lira
2:53
but not enough for people to about to
2:55
sell all that your other beat you know
2:57
trillions of them to buy young lira so
2:59
now the government can sell lira to
3:02
these people who want it at a slight
3:04
premium to the euro would be my
3:05
recommendation so maybe you know 1%
3:07
premium so now people can sell the euro
3:10
get the lire they want at a very small
3:12
premium and run their lives and you have
3:14
a strong stable currency it doesn’t go
3:16
down it wants to go up but the
3:18
government sells it to keep it constant
3:20
and the government is getting all these
3:22
euro from people who want wera
3:24
and it uses that to pay off its lira
3:26
debt to service its euro debt and to get
3:29
through this difficult transition period
3:31
which could be six months to a year
3:32
without a collapsing currency and the
3:36
government survives and everything runs
3:38
well so it’s critically important my
3:42
perspective not to force anybody to
3:45
convert anything from euro to lira and
3:48
that includes all bank deposits which
3:49
includes the central bank deposits which
3:51
are Italian bonds you do not convert the
3:54
Italian bonds you leave them in Europe
3:57
otherwise you know and then okay so
4:00
that’s my proposal for for how to exit
4:03
now the important thing is I call it
4:06
Plan B but it’s not plan a okay I don’t
4:11
see it as planning plan a is to what’s
4:15
needed in Italy and the rest of the
4:17
European Union desperately is a higher
4:20
budget deficit so plan a is to get the
4:23
European Union to relax the limit
4:25
three percent to eight percent had five
4:27
percent now you can do that either
4:29
through lower taxes you could just
4:31
eliminate the value-added tax that would
4:33
turn the economy around immediately or
4:34
you could increase public services all
4:36
the public services of car pay those are
4:38
political choices it’s one or the other
4:40
or both a little bit of both would work
4:42
just fine and then everything’s fine in
4:45
the European Union nobody’s going to
4:47
complain when unemployment comes down to
4:49
five or six percent when GDP is growing
4:51
at three or four or five percent you
4:53
know in the output gap is shrinking
4:54
there’s all these problems all the
4:57
dissension not all of it but the
4:59
majority of the dissension is going to
5:00
go away and then some of the and all the
5:03
other problems become things that can be
5:05
discussed and worked on over time but
5:08
the pressure is taken off if you do that
5:10
so that is my proposal for plan a get
5:13
that limit relaxed leave the European
5:14
Union alone most young people are
5:16
particularly like it the way it is your
5:18
citizens of Europe you get to travel
5:20
where you want you go to school where
5:21
you want you can work in different
5:22
countries
5:23
you know it’s an enormous like you know
5:27
liberating freedom to be able to do that
5:29
and not go back to the way it was but if
5:32
they refuse to do that if they keep the
5:34
limit of three percent and continue to
5:36
destroy the civilization and take away
5:38
your future you have no choice okay but
5:41
to go to plan B now how do you get
5:43
leverage for plan a how do you get the
5:46
European Union to discuss it you have to
5:47
have a credible plan B otherwise
5:50
nobody’s going to take your phone call
5:51
to even discuss plan a so the purpose of
5:54
plan B is to have a credible plan B to
5:56
go back to lehre which will work you can
5:58
get back to full employment you go back
6:00
to prosperity but it gives you more
6:02
importantly it gives you the leverage to
6:04
accomplish plan a
oooooo
Randall Wray
Endogenous Money | Randall Wray Explains Warren Mosler’s Unique Insight https://youtu.be/LUBquM3LB3Q?si=HEJMtNQnB7R1BKF3
ooo
Endogenous Money | Randall Wray Explains Warren Mosler’s Unique Insight
(https://www.youtube.com/watch?v=LUBquM3LB3Q)
Just Prof. Wray‘s opinion on the one new thing about MMT, which might piss off Bill Mitchell. But… whatever. Mosler recognized when the Central Bank sells Treasury bonds it is an interest rate maintenance operation, and that when Treasury sells bonds it is the exact same effect, it is not a borrowing operation. Both are using IRMA (interest rate maintenance accounts): a reserve drain from the banking system in return for interest paying accounts at the CB.
Transkripzioa:
0:00
all right now I said there was one
0:05
contribution
0:06
by modern money theory that was here
0:10
where you you do not find it
0:13
until modern money period
0:15
every other idea that we have
0:18
that is comprising modern money Theory I
0:21
think you can find it
0:24
uh someone else already expressed it
0:27
somewhere a lot of the ideas you could
0:30
find expressed 200 years ago so they’re
0:32
definitely not new they’re very old
0:34
Vikings
0:35
uh the um
0:39
the the views of government spending
0:41
those are very old ideas okay but there
0:44
is one that I don’t think you will find
0:47
anyone ever expressed it before
0:50
and that is Warren Moses
0:53
who was uh
0:57
hedge fund manager and he dealt in
1:01
government bonds
1:03
and he was sitting there I think in the
1:06
early 80s
1:07
and he was saying you know
1:09
when the um
1:12
Central Bank the Fed
1:14
sales bonds we call that a monetary
1:16
policy operation
1:19
when the treasury sells bonds we call
1:22
that
1:23
borrowing
1:27
and he thought to himself but they have
1:29
exactly the same impact there is no
1:32
difference in the functional impact
1:36
of the Central Bank selling bonds or the
1:39
treasury salary bonds
1:41
what’s the functional impact they drain
1:44
reserves out of banking system
1:47
we said both of those really are
1:49
monetary policy
1:51
whether the transit sales bonds
1:53
or the FED sales bonds it’s monetary
1:56
policy it has nothing to do with
1:58
borrowing
1:59
selling bonds is not a borrowing
2:00
operation
2:02
it is a monetary policy operation
2:04
designed to drain Reserves
2:08
okay so he called it Irma Irma
2:12
an interest rate maintenance
2:15
account
2:17
government bonds are an interest rate
2:18
maintenance account why do you sell them
2:21
you sell them to get excess reserves out
2:23
of the banks so the industry doesn’t
2:25
fall
2:27
that’s the purpose of laws
2:30
no one had ever put it this way before
2:32
when when I first heard Warren say it
2:35
you know we were agreeing on lots of
2:37
things and then he said that I said wait
2:38
a minute
2:39
okay that’s bizarre it’s not a borrowing
2:42
operation at all
2:43
it’s an in-shaped maintenance operation
2:47
but I knew the accounting the T accounts
2:53
and I knew that what he said was right
2:57
because I had done it as a student I had
3:01
a particular teacher a guy named John
3:03
randlet who insisted we spent hour after
3:06
hour after hour doing the accounting of
3:09
everything you could possibly know
3:11
and we had done the accounting of that
3:12
and it was true
3:14
that’s what happens when the treasury
3:16
sells clogs
3:17
and preserves go down so I knew that
3:19
that was right and I think that is new
3:23
people I mean
3:25
ran that knew of course the selling
3:28
bonds was removing reserves but he’s
3:31
still called
3:32
Bond sales borrowing when the treasury
3:35
days but it’s not borrowing more
3:40
treasuries don’t borrow their own
3:42
currency they can’t do it
3:45
now your government can issue foreign
3:49
currency denominate bonds and we call
3:51
that borrowing
3:53
Brazil cannot create dollars
3:57
so if your government issues bonds
4:00
denominated dollars I’m perfectly fine
4:03
with calling that borrowing
4:05
okay it’s not your currency
4:07
but you can’t borrow your own currency
4:09
that’s nonsensical that would be like
4:12
you writing an IOU to your neighbor and
4:16
then trying to borrow it from them
4:19
would that make any sense
4:21
borrowing your own IOU
4:24
it’s nonsensical
4:26
okay you actually can’t show me a
4:29
balance sheet that makes any sense where
4:31
you’re borrowing your own ious
4:34
so you can’t show a treasury balance
4:36
sheet that makes any sense where the
4:38
treasury is borrowing its own currency
4:40
that’s not what is going on
4:43
in cell bonds for their own currency but
4:46
it’s not borrowed they had to put the
4:48
currency there first
4:50
the reserves have to get into the banks
4:53
before they can buy the bonds
4:56
there’s no other way for them to buy
4:58
them because the only thing that is
5:00
accepted here when the federal treasury
5:02
sells bonds the only thing they accept
5:04
is reserves that’s it
5:07
it’s a depature reserves okay so the
5:10
reserves have to get in there first
5:12
the spending already occurred
5:16
to get the reserves in the system or The
5:19
Lending
5:20
they had to be spending or lending for
5:22
the banks to get the reserves they used
5:24
to buy the law n so you can’t call that
5:26
a borrowing operation
5:28
all it does is change their portfolio
5:31
instead of reserves they have bonds
5:34
okay
5:36
then there’s another uh
5:39
continuing horizontal Parts
5:41
Banks create M1 M2
5:45
when they make loans or when they buy
5:48
other kinds of financial assets
5:50
we can call that a leveraging
5:54
averaging isn’t the same thing as the
5:55
money multiplier
5:57
it just means that they have to have
6:00
either have reserves or access to
6:03
Reserves
6:04
when they make loans and create deposits
6:08
why
6:10
because they have to clear with other
6:11
Banks
6:12
so they’re going to have to have
6:14
reserves or have access to reserves in
6:18
order to clear with other Banks
6:21
so when you think of that as a
6:23
leveraging I mean it’s using the term
6:24
leverage this is the way it’s always
6:26
using Financial
6:28
online right you’re leveraging
6:30
the reserves you have or the reserves
6:33
that you think
6:35
ing
6:36
um yeah that pretty much
oooooo
MMT: Taxes/Borrowing DO NOT “Pay For” Government Spending
ooo
MMT: Taxes/Borrowing DO NOT “Pay For” Government Spending
(https://www.youtube.com/watch?v=tEiNLmg2tYA)
Professor L. Randall Wray discussing government spending and taxation. From a point of logic, a government that issues its own currency must spend before it taxes, or else there would be no currency to collect. Therefore, taxes don’t pay for spending, but rather spending allows the government to collect taxes.
Cash is basically an IOU from the government: if you present a dollar at tax time, they agree to redeem it, and extinguish your tax obligation. When the government spends, it is the same as you writing an IOU, except that most of the private sector accepts the government’s IOU and circulates it as money, while very little of the private sector accepts your IOU.
This means the government can’t “borrow” dollars. Borrowing your own IOU doesn’t even make sense in terms of accounting. IOUs can either be created/issued or redeemed/destroyed, not borrowed by the person who issued them. The purpose of government “borrowing” is actually to sell bonds to drain reserves from the banking system, in order to allow the Fed to hit its interest rate target. More on that here:
• MMT: Why Do Governments That Issue Th… All of that only applies to a government that issues its own currency. State and local governments do not, and neither do the national governments in the European Union. They are all (basically) users of a foreign currency, which they must get before they can spend.
See the whole video here: • L. Randall Wray – Modern Money Theory…
Transkripzioa:
0:00
From inception, you can’t pay your dollar tax unless the government has provided
0:10
some dollars.
0:11
What this means is, the government needs to spend the dollars so that you can pay
0:18
taxes. In other words, the logic tells us that the spending comes before the
0:28
government can collect the taxes. Because you can’t pay your taxes until you’ve
0:34
got the dollars. If the dollars come from government spending, the government needs to
0:39
spend befor you can pay your tax. So logically, the government doesn’t spend taxes.
0:47
Logically, the government spends so that you can pay taxes. The spending has to come first.
0:53
What that means is taxes actually don’t “finance” government spending.
0:58
Now of course, if the government has been spending for years and years and years,
1:03
a lot of dollars can accumulate in the hands of the non-government sector. Ok, and so
1:09
that you have accumulated dollars that you can pay taxes with. However, they all came
1:15
from the government spending originally. So, once we’ve developed a monetary
1:22
economy and there’s lots of dollars in circulation, then this logic
1:29
becomes less apparent. You say, “oh, I have a lot of dollars to pay my taxes, I
1:34
don’t need to wait for the government to spend. But the government had to spend from
1:38
inception in order to get the dollars into the economy so that taxes could be paid.
1:46
The sovereign government issues – oh, third thing. The sovereign government that issues its own
1:51
currency cannot be revenue-constrained. Because it issues the dollars as it
1:59
spends. If it wants to spend more, it issues more currency. It can’t be revenue
2:06
constrained. It can’t run out of its own currency…
2:12
If you issue your own currency,
2:16
you can’t run out.
2:18
Uncle Sam can’t run out of his own currency. He never needs to borrow his own
2:23
currency. And in fact if you think about it,
2:28
borrowing your own currency would make no sense. It would be like: you’ve written
2:33
an IOU to your neighbor, I owe you a cup of sugar. And you find out you need
2:38
another cup of sugar. Are going to go try to borrow that IOU back from your
2:43
neighbor, in order to get another cup of sugar?
2:47
No. You’re gonna write another IOU.
2:51
So I’ll come back to this, but sovereign countries don’t need to
2:58
borrow their own currency. In fact, there’s no balance sheet operation that you can
3:02
show me in which someone borrows back their own IOU.
3:08
And this was Warren Mosler’s
3:11
brilliant observation. Bond sales are not a borrowing operation. There’s
3:16
something else entirely. So I’ll come back to explain what that is.
3:20
Now sometimes countries borrow in foreign currency, ok. And you can borrow
3:26
foreign currencies. Again, the problem with borrowing foreign currencies is that
3:33
you have to pay back in a foreign currency
3:35
and so that will constrain your domestic policy space.
3:39
So that I would say, almost always, it’s a bad idea
3:43
for governments to issue debt in a foreign currency because that is similar to
3:48
adopting a fixed exchange rate. You’re going to have to operate your economy in
3:54
such a way that you get the foreign currency to service the debt.
3:57
It does face constraints.
4:00
The main constraint it faces is the resource constraint: it can run out of resources to buy.
4:06
It can push up the prices of resources. So too much government spending can
4:14
cause inflation, as people have long argued. But it can’t cause insolvency
4:24
It can’t cause insolvency of the government
4:27
It can’t cause the government to run out. So the fourth point is, there is no
4:33
solvency risk for a government issues its own currency. There is no possibility
4:38
of bankruptcy. When President Obama tells us that the U.S. government has run out
4:44
of currency, he is misinformed. Can’t happen.
4:48
The U.S. government can always issue more. It’s not possible to run out. There is no
4:54
chance that running budget deficits, spending more than tax revenue, is
4:59
going to bankrupt the United States government. It can’t happen because we can
5:04
always issue more. We can always make all payments as they come due.
oooooo
@tobararbulu # mmt@tobararbulu
Hyman Minsky – “Stability Is Destabilizing”, Employer Of Last Resort https://youtu.be/MzxM2GDM5wI?si=wu0J1eHUFY7BMJ98
ooo
Hyman Minsky – “Stability Is Destabilizing”, Employer Of Last Resort
(https://www.youtube.com/watch?v=MzxM2GDM5wI)
Professor L. Randall Wray discussing the intellectual precursors to Modern Money Theory. Hyman Minsky is now well-known for his Financial Instability Hypothesis, but also had a lot to say about a Job Guarantee program.
See the whole video here: • L. Randall Wray – Modern Money Theory.
Transkripzioa:
0:00
Hyman Minsky, who was my dissertation advisor, was famous for [his] Financial
0:07
Instability Hypothesis.
0:09
So this is also incorporated within Modern Money Theory. The most famous line
0:15
from Minsky is “stability is destabilising”.
0:18
So if the economy appears to be operating in a very stable manner,
0:25
the problem is that people will change their behaviour. They will assume that
0:29
it’s safe to take more risk. As they take more risk the stability disappears and
0:35
you get financial crises. In one sentence that’s the theory. And so by using the
0:45
understanding of sovereign currency which came from Knapp, Innes, Goodhart,
0:51
and so on, we were able to — beginning in 1992 — to write about the coming crisis in
0:59
Europe land. That the way that the euro was set up by trying to divorce fiscal
1:05
policy from the sovereign currency, as each country adopted a foreign currency
1:10
called the euro, we said that this system will not be able to deal with its first
1:17
serious financial crisis. And then following Minsky we said, “Aha! we have
1:24
our chairman Greenspan and Bernanke famous for eliminating risk”.
1:32
Okay, when Greenspan was the chair of the Fed we said “Oh, there’s the Greenspan
1:37
put.” In other words you can go ahead and take all the risk you want because you know
1:42
that no matter what happens, Greenspan won’t allow
1:44
anybody to fail. Bernanke even wrote a paper called “The Great Moderation”.
1:49
‘Central Bankers know what they’re doing now. You can trust us therefore there is no risk
1:53
any more. Financial crises are a thing of the past; we’re not going to have them any more.’
1:58
Okay? So we said, “You know, this is exactly what Minsky was talking about. The stability
2:03
will create the instability”. So we said, “We’re going to have a major financial
2:09
crisis, compounded by the Clinton budget surpluses that put the private sector so
2:15
heavily in debt, by the deregulation pushed by Greenspan, Larry Summers, Bob Rubin”.
2:22
“We’re going to have a massive financial crisis which the US will be able to deal
2:28
with because we’re a sovereign currency. Euroland will not be able to deal with it”. “They will face a crisis
2:34
they cannot get out of”. And so in addition to the creation of the blogosphere, being
2:41
right about these two things also increased the credibility
2:47
of the Modern Money Theory. The last piece in the history of thought that led to
2:59
the development of Modern Money Theory is the idea of “Employer of Last Resort”. So Abba Lerner
3:07
says, “if there is any unemployment at all, it can be eliminated by the government
3:12
spending more”. Now the problem is that you can get inflation. Lerner thought
3:22
you get inflation only when you go beyond full employment. Now in the sixties he
3:28
changed his mind on this. The writing in the forties, his prescription was, “Just spend more”!
3:33
The problem is we get inflation long before we get to full employment. And so the government
3:39
has to cut back its spending, raise taxes, slow down the economy, before we ever get to
3:44
full employment. So Hyman Minsky who’s known for financial instability in the 1960s
3:50
worked to develop a proposal of Employer of Last Resort. So he argued
3:56
that only the government can afford to hire all the unemployed. And so it must
4:02
be the government’s responsibility in order to maintain full employment. And we do that with
4:08
what we now call a Job Guarantee, he called it Employer of
4:11
Last Resort. So what you want to do is design a New Deal-style jobs programme in
4:21
which the government takes workers as they are, pays them a wage which will
4:27
become the minimum wage throughout the economy, hopefully it’s a living wage, and
4:33
then finds useful things for people to do. Just as the New Deal jobs programme did
4:38
— and I know that you’re all young and maybe you don’t know too much about this —
4:43
13 million people were employed in the New Deal jobs programme. The biggest was the
4:48
WPA which employed 8 million people. You can still see the output of these workers all over the
4:55
country. They built thousands of schools; they built probably tens of thousands of
5:01
bridges, hundreds of thousands of miles of road; they built public buildings all
5:07
over the United States. They brought a country that was a developing nation
5:12
into the 20th century. It is not an exaggeration to say that they developed
5:21
America. They made America a developed
5:23
nation. And in the New Deal jobs programme. So this is what Minsky had in mind
5:28
when he talked about it. I won’t go any more into the, you know, tiny details of
5:36
how you run the program to make sure that it is not inflationary but Minsky argued
5:42
this path to full employment will not cause inflation whereas just having the
5:47
government spend more could be inflationary.
oooooo
Stephanie Kelton
Stephanie Kelton: The big myth of government deficits | TED
ooo
Stephanie Kelton: The big myth of government deficits | TED
(https://www.youtube.com/watch?v=FATQ0Yf0Fhc)
Government deficits have gotten a bad rap, says economist Stephanie Kelton. In this groundbreaking talk, she makes the case to stop looking at government spending as a path towards frightening piles of debt, but rather as a financial contribution to the things that matter — like health care, education, infrastructure and beyond. “We have the resources we need to begin repairing our broken systems,” Kelton says. “But we have to believe it’s possible.”
Transkripzioa:
Intro
0:13
When things break, we have an opportunity.
0:17
We can pick up the pieces and put them back together the old way,
0:22
or we can look for better ways to build.
0:25
Covid broke everything.
0:28
It put a spotlight on the many deficits in our economy —
0:33
in employment, education, health care, housing —
0:39
and it showed how inequality made it all worse.
0:44
Here in the US and around the world, governments did some extraordinary things.
0:50
They sent money to people directly to help them buy food and pay rent.
0:56
They provided free Covid testing
0:59
and expanded health care to cover more of the population.
1:03
They gave money to businesses to help keep them afloat
1:07
while much of the economy was temporarily shut down.
1:12
They offered debt relief to millions of people
1:14
who borrowed money to go to college.
1:17
They did all of this and more without raising taxes
1:23
or having a prolonged battle
1:25
over the usual question of how to pay for it.
1:30
To me, this was exciting,
1:33
and I’m an economist, so I don’t say that a lot.
1:36
(Laughter)
1:39
But as someone who’s been trying to change the way we think
1:43
about deficits and government spending,
1:46
I saw this as an opportunity
1:49
to show why government budgets don’t work like household budgets.
1:54
Why all of their red ink is really our black ink.
1:59
And why our nation can afford to keep investing in the things we need
2:05
even after spending trillions to fight the pandemic.
2:09
For a while, it looked like the US and other countries
2:14
were starting to break the mold on the old way of thinking
2:18
about deficits and taxes.
2:20
But now here we are,
2:23
just a handful of months after all of that bold action,
2:28
and we’re sliding back into our old habits of thought.
2:32
Can we build affordable housing and fix crumbling infrastructure?
2:37
Can we expand Medicare to include dental, vision and hearing?
2:43
Can we tackle our climate crisis?
2:47
As Congress debates these questions, everyone is back to asking,
2:52
how will you pay for it?
2:55
It’s the wrong question.
2:57
In fact, the right questions don’t involve money at all.
3:02
Instead of worrying about where the financing will come from,
3:06
we should be asking, are these things worth doing
3:10
and do we have the real resources, the people, the equipment,
3:15
the raw materials and the technology to do them?
3:19
Well, they make society better off.
3:21
And do we have the political will to act?
3:26
I’m one of a handful of economists
3:28
who contributed to the body of academic scholarship
3:32
known as MMT or Modern Monetary Theory.
3:36
MMT provides an accurate description
3:39
of how a fiat currency like the US dollar or the British pound actually works.
3:47
It reminds us that we’re no longer on a gold standard,
3:51
so finding the money to pay for the things we need
3:55
is never an issue for countries like the US or the UK.
4:01
If we’re going to fix what’s broken in our economy,
4:05
we have to fix the way we think about the limits on government spending.
4:12
Let me give you an example
4:13
of the kind of broken gold standard thinking
4:17
that still permeates our discourse.
4:21
Back in 1983, the prime minister of Great Britain, Margaret Thatcher,
4:26
said these words:
4:28
“If the state wishes to spend more,
4:31
it can do so only by borrowing your savings or by taxing you more,
4:38
and it is no good thinking that someone else will pay.
4:42
That someone else is you.
4:45
There is no such thing as public money.
4:49
There is only taxpayers’ money.”
4:54
Maybe you’ve heard the contemporary version of Thatcher’s dictum.
4:59
“There is no magic money tree.”
5:02
It’s just another way of saying that everything must be paid for
5:07
and that the taxpayer is ultimately on the hook
5:10
for whatever the government spends.
5:14
It sounds worrying.
5:16
As individuals, we know that when we borrow money
5:20
to go to college, start a business or buy a home,
5:25
we’re personally saddled with that debt.
5:28
We have to find the money to pay it back.
5:31
Taking on too much personal debt can lead to all sorts of problems.
5:36
Even small businesses and large corporations
5:39
have to walk a fine line when it comes to debt.
5:43
But the federal government is fundamentally different.
5:48
Unlike the rest of us,
5:50
Congress never has to check the balance in its bank account
5:54
to figure out whether it can afford to spend more.
5:59
As the issuer of the currency,
6:02
the federal government can never run out of money.
6:06
It can afford to buy whatever is available and for sale in its own currency.
6:13
Now that might mean spending on roads and bridges,
6:17
a military arsenal or hospitals and schools.
6:22
Finding the votes to pass a spending bill can be hard,
6:28
but finding the money
6:30
is never a problem.
6:33
They just create it.
6:36
So here’s how it works.
6:38
Whenever Congress and the president agree to spend more,
6:43
the government’s bank, the Federal Reserve,
6:46
works with the rest of the financial system
6:49
to get that money into our accounts.
6:53
Everything’s done electronically,
6:55
so there’s no physical printing of money involved.
7:00
If you got a 1,400-dollar check from the federal government
7:03
earlier this year,
7:05
or if your company received money to help cover payroll and other expenses,
7:11
then you received some of the newly minted digital dollars
7:16
that were created to support our economy.
7:21
No taxpayers were involved in that process.
7:24
It was all done using nothing more than a computer keyboard.
7:30
So why are we hearing so much about the need to raise taxes
7:35
to pay for infrastructure and make other investments in our economy?
7:40
In a word,
7:42
deficits.
7:44
We’ve all been conditioned to worry about deficits,
7:48
so lawmakers are looking for ways to spend more
7:52
without adding to the deficit.
7:56
That’s what this whole pay-for game is about.
8:00
Unfortunately, deficits have gotten a bad rap.
8:05
They’re almost always seen in a negative light.
8:10
And I would like to change that.
8:12
When we hear the word “deficit,”
8:14
we probably think of a deficiency or shortfall.
8:19
A deficit always sounds ominous.
8:22
So when we hear that the federal government
8:25
just ran a three-trillion-dollar budget deficit,
8:29
it can sound worrying.
8:32
And it can even anger people.
8:35
But there’s another way to think about government deficits.
8:39
Just as a six becomes a nine when we view it from a different angle,
8:45
a government deficit becomes a financial surplus
8:49
when we look at it from another perspective.
8:52
A deficit hawk might look at this picture
8:55
and see nothing but a sea of worrying red ink.
9:00
That’s not how I look at it.
9:02
Here’s what I see.
9:04
I see what’s happening
9:05
on the other side of the government’s ledger.
9:09
When the government spends more than it taxes away from us,
9:13
it makes a financial contribution to some other part of the economy.
9:19
Their red ink is our black ink.
9:23
When you look at it this way,
9:25
it becomes clear that every deficit is good for someone.
9:31
The question is for whom
9:35
and what are those deficits being used to accomplish?
9:39
It matters how the money is spent
9:42
and who ends up with the resulting surplus.
9:46
Tax cuts that deliver huge windfalls for those at the top
9:51
without sparking investment and opportunity
9:54
for the rest of the population
9:56
don’t make good use of deficits.
9:59
On the other hand,
10:01
spending trillions to support the economy during the pandemic
10:06
put the deficit to good use.
10:09
We just had the shortest recession in US history.
10:14
To me, that was fiscally responsible.
10:18
Being responsible shouldn’t mean running the government’s finances
10:22
like a household.
10:25
Instead of trying to keep the deficit in check,
10:28
Congress should be focused on keeping inflation in check.
10:33
That’s the real limit on spending
10:36
and it’s the thing to watch out for
10:39
if you’re thinking about spending trillions
10:41
on things like infrastructure, health care and free college.
10:46
Instead of asking, “How will we pay for it?,”
10:50
Congress should be asking, “How will we resource it?”
10:55
To answer that question,
10:58
think of people, factories, equipment and raw materials like wood and iron.
11:05
If we’re going to build high-speed rail,
11:08
fix crumbling infrastructure and green our economy,
11:13
then we’ll need concrete, steel and lumber.
11:16
We’ll need construction workers, architects and engineers.
11:21
We’ll need companies that can fill thousands of orders for solar panels,
11:26
EV charging stations and electric school buses.
11:30
If our economy has the productive capacity to quickly supply all of those things,
11:37
then we can easily resource it.
11:40
Or take health care or free college.
11:44
Paying the bills to expand Medicare,
11:47
to include dental, vision and hearing is easy.
11:52
The challenge is making sure
11:55
we have enough dentists, optometrists and audiologists
11:59
to treat everyone who needs care.
12:03
And if you want to resource free college,
12:05
then you need the faculty,
12:07
the classrooms and the dormitories to teach and house more students.
12:13
In a full-employment economy,
12:16
all of the resources you need are, well,
12:20
fully employed.
12:22
There’s no spare capacity anywhere in the system.
12:26
So if the government suddenly tried to make all of these investments at once,
12:31
it would quickly discover that it doesn’t have the people
12:34
or the building materials to do the work.
12:38
To get the resources it needs,
12:40
it would have to compete with the private sector,
12:43
bidding up wages and prices.
12:46
That would be inflationary and it would be fiscally irresponsible.
12:54
We are a long way from full employment.
12:58
We have the resources we need to begin repairing our broken systems.
13:05
But we have to believe it’s possible.
13:08
We can’t let words like debt and deficits hold us back.
13:13
With a better understanding of public money,
13:16
where it comes from and how it works
13:19
we can take aim at the many real deficits that are bearing down on us.
13:26
In every crisis lies an opportunity.
13:30
We can pick up the pieces
13:32
and try to reassemble the fragile systems that were in place before the pandemic
13:38
or we can build anew,
13:40
shaping our bountiful resources into the kind of world we want to live in,
13:46
one that cares for our people and our planet.
13:51
I truly hope we choose to be bold.
13:54
Thank you.
oooooo
@tobararbulu # mmt@tobararbulu
Top 10 Things Stephanie Kelton Wants You to Know About the Economy https://youtu.be/RpyuqKLh6QU?si=w3AsJqHtFiXjFftH
ooo
Top 10 Things Stephanie Kelton Wants You to Know About the Economy
(https://www.youtube.com/watch?v=RpyuqKLh6QU)
Economist Stephanie Kelton delivered the Presidential Lecture at Stony Brook University on Oct. 15, 2018.
Transkripzioa:
Intro
0:10
the sky is always falling so what I
0:14
would like this afternoon to be is
0:16
essentially a form of group therapy
0:18
because we need it okay because they’re
0:21
scaring us with these stories about how
0:24
it’s unpatriotic how its burdening the
0:26
next generation how its dooming us to a
0:28
future of higher taxes catastrophe for
0:32
the nation right and I want to try to
0:34
lower the temperature get us to the
0:36
point where we can at whatever age it’s
0:39
legal to do so open a nice bottle of red
0:41
wine read the newspaper see the headline
0:43
national debt isn’t an all-time high and
0:46
have that nice glow about us and feel at
0:49
peace with the world right there’s no
0:51
reason to panic
0:55
the government’s budget is nothing like
0:57
a household budget this is the problem
0:59
they’re not like us their budget doesn’t
1:02
work the way our budgets work deficit
1:04
spending by the federal government isn’t
1:06
the same as you and I spending more than
1:08
we make year after year borrowing by the
1:10
federal government isn’t the same as you
1:12
and I going out and putting money on a
1:14
credit card one of us issues the
1:17
currency they do the other one of us you
1:20
and I are merely using the US dollar so
1:24
we have a distinction to make between
1:25
currency issuers and currency users the
1:29
issuer of the currency the federal
1:31
government in this case can never run
1:34
out of it can never go broke can never
1:37
have bills coming due that he can’t
1:40
afford to pay can’t become insolvent
1:42
can’t end up like people you may know
1:45
right who took on too much debt and got
1:47
into trouble and were forced into
1:49
bankruptcy
1:53
my deficit my red ink is your black ink
1:57
okay here it is with actual historical
1:59
data for the u.s. going back to 1960 the
2:03
red line is my account balance okay the
2:06
red line is my financial balance the
2:09
black line is the private sector in the
2:11
US it’s all the households it’s all the
2:13
businesses in the US combined and what
2:15
do you notice I’m almost always in the
2:18
red my budget is almost always in
2:20
deficit and yours is almost always in
2:22
surplus and not only that they tend to
2:26
move opposite one another meaning when I
2:28
run bigger deficits you all end up with
2:31
bigger surpluses
2:33
okay so my reading is you’re blacking so
2:37
when you see a headline like this one
2:40
right from The Wall Street Journal just
2:42
a few days ago trillion-dollar deficits
2:45
could be the new normal
2:47
this is meant to shock and frighten
2:50
trillion dollar deficits could be the
2:53
new normal but take a breath and read it
2:55
this way watch the word deficit don’t
2:58
you feel better don’t you feel better
3:04
the national debt is all of the
3:07
outstanding Treasury bonds that the
3:12
government spent the money into the
3:13
economy didn’t tax it back and then
3:16
traded the cash for a different
3:18
financial instrument called a security a
3:21
government bond okay so the entire
3:24
national debt is nothing more than a
3:26
record a historical record of all of the
3:30
dollars that were spent into the economy
3:32
not taxed back and are currently being
3:36
held in the form of US Treasuries that’s
3:39
all the national debt is
3:44
what are we really a China so I have a
3:47
friend who’s a bond trader is he’s a
3:49
fixed income guy trades government bonds
3:52
and his name is Warren Mosler and Warren
3:55
will often say the only thing we ought
3:56
China is a bank statement okay it’s he’s
3:59
being a little bit funny but essentially
4:01
at the end of the day that’s about it
4:03
okay what are we gonna Bank statement we
4:06
already got the stuff we traded it for a
4:08
Treasury and at the end of the day as
4:10
long as China wants to orient its
4:13
economy around exporting in order to
4:16
grow in order to create jobs then we’re
4:20
the beneficiary in this bargain
4:26
eliminating the national debt means
4:28
eliminating all of those safe securities
4:32
called US Treasuries that people like to
4:34
hold in their portfolios because that’s
4:36
what the national debt is you pay off
4:38
the debt you eliminate the debt there
4:40
are no more Treasury securities anywhere
4:43
they’re done
4:47
so why does that happen why does
4:50
something that sounds so good and
4:52
fiscally responsible
4:54
runnings and budget surpluses and paying
4:56
down debt why does it tend to coincide
4:58
with bad economic consequences why do we
5:02
end up with depressions in the great
5:03
recession and very quickly because we
5:06
could talk for an hour just about I
5:07
could about this picture but I would
5:10
just show you this is where this is
5:11
where we were with Bill Clinton that is
5:15
the government’s budget moving into
5:17
surplus you can see the red that’s the
5:20
government’s deficit government’s almost
5:22
always in deficit but there were those
5:24
four years right there under Bill
5:26
Clinton when the government’s budget
5:27
moved into surplus and there was great
5:29
celebration right this is the first time
5:32
in generations that the budget has been
5:34
in surplus this is the fiscally
5:36
responsible thing to do you know
5:37
Democrats delivered this well yeah but
5:40
guess what look what happened to the
5:42
private sector’s financial position
5:44
right that it was the built on the backs
5:47
of the private sector the private
5:48
sectors financial balance went deeply in
5:51
the red and that’s what allowed the
5:53
public sectors balance to move
5:55
temporarily into the black but it didn’t
5:58
last and it can’t last why because it
6:01
was driven by primarily households
6:03
spending more than their income
6:06
borrowing on the back of a dot-com
6:09
bubble and then a housing bubble and
6:11
eventually the whole thing unravels too
6:14
much debt mostly for households
6:20
inflation is every central bankers
6:22
public enemy number one that’s what he’s
6:24
worried about okay so can you imagine if
6:28
instead of saying Social Security is
6:30
going broke we have to cut benefits the
6:32
system is unsustainable forget all of
6:35
that if instead of that we were saying
6:38
what are the things that we can do today
6:40
what are the investments we can make
6:43
today to increase the odds that in 5 10
6:47
20 years the US economy is productive
6:50
enough that we can make good on all of
6:53
those promises without causing an
6:55
inflation problem the Republicans would
6:57
say what tax cuts and deregulation are
7:00
the best ways to produce an economy that
7:03
is you know maximum growth and high
7:05
productivity the Democrats would say
7:06
what education infrastructure R&D but at
7:10
least we would be having the right
7:12
debate right at least we would be having
7:14
a good constructive productive debate
7:16
over the real issues that matter instead
7:19
of this phony you know where the money
7:22
is running out sort of debate
7:27
the US government is never going to run
7:29
out of the US dollar the US government
7:32
is the scorekeeper for the dollar it
7:34
can’t run out of dollars any more than a
7:36
carpenter can run out of inches or the
7:39
scorekeeper here at Stonybrook can run
7:41
out of points when the football team is
7:43
putting up 77 points in a game and all
7:46
the fans are sitting in the audience
7:47
going oh my god what happens if they
7:49
score again they’re never gonna have
7:51
enough points to put up yes they will
7:52
they can’t run out the stadium can’t run
7:55
out of points the US government can’t
7:57
run out of dollars it’s a unit right the
8:00
government spends by instructing its
8:02
bank to change the numbers in someone’s
8:04
account upward that’s how we pay for
8:07
things it’s not actually by physically
8:08
printing money and making payments it’s
8:11
all done electronically
8:16
this is the debate I wish we were having
8:18
instead of getting bogged down in the
8:20
pay for a question focus on the real
8:23
things that matter what can we afford
8:25
the answer isn’t in financial terms the
8:28
answer is in real terms if we want to do
8:32
a trillion dollars of infrastructure and
8:35
somebody says how are you going to pay
8:36
for it you should say I’m gonna pay for
8:39
it by hiring 300,000 construction
8:43
workers by using X tons of steel by
8:46
using 2 or 3 percent of our unused spare
8:50
capacity in our factories by mobilizing
8:52
this many machines and heavy equipment
8:55
and so that’s how you pay for it real
8:58
resources and if you don’t have them if
9:01
the economy is already operating at full
9:04
employment and everybody’s being used
9:06
all the workers are already employed all
9:08
the resources are currently being used
9:11
then you can’t afford it right but if
9:15
you have spare capacity if you have idle
9:17
people if you have idle machines if the
9:20
recent raw materials are there then the
9:22
government can step in and say now would
9:24
be a good time because we can mobilize
9:26
these resources in a responsible way
9:29
that means without causing inflation
9:31
without competing for those resources
9:34
with other people who are currently
9:36
using they’re not being used we can hire
9:38
them put them to work and improve the
9:40
standard of living right in the interest
9:42
of the public of the public good so
9:45
thank you very much
9:47
you
oooooo
@tobararbulu # mmt@tobararbulu
Cryptocurrency vs Fiat Money
youtube.com
Professor Stephanie Kelton, economic adviser to Bernie Sanders and leading light of Modern Monet
ooo
Cryptocurrency vs Fiat Money
(https://www.youtube.com/watch?v=iwq-Az_oFrk)
Professor Stephanie Kelton, economic adviser to Bernie Sanders and leading light of Modern Monetary Theory, on the David Pakman Show discussing bitcoin and cryptocurrencies, and contrasting with what MMT has to say about fiat money. In MMT, the catchphrase is “taxes drive money.” That means that demand for government money, like dollars, is generated and maintained by enforcement of taxes: if the government declares that you owe $100 in tax, and that it will do something very unpleasant to you if you don’t pay, then you had better go out and get $100 somehow!
It is the government’s ability to enforce taxes that prevent fiat currency from being abandoned (and when government loses this ability, the result is usually hyperinflation).
By contrast, cryptocurrencies, at least the models we’ve seen so far like Bitcoin, don’t have any sort of demand or price anchor. There is nobody forcing you to pay taxes in Bitcoin, so participation is purely voluntary, and if people change their minds about using it, its value could drop quickly to zero.
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