MMT: overcoming the political divide.

Discussion in 'Economics & Trade' started by a better world, Mar 12, 2020.

  1. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    That is mere sophism, like saying it was not the US Army that invaded Iraq, it was people.
     
  2. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    No, it only owes us relief from the debt once we have paid those dollars to the government. The debt was the tax liability, which the payment of money discharges. Not the money used to discharge it.
    No, he was owed nothing until he paid the tax, and then it was nothing but a receipt showing his debt had been discharged.

    Why not just give up the false premise that all money is debt? Why is it so necessary to pretend that money can only exist as debt?
     
  3. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    Edit: (what I get for writing and not proof reading)

    Should be, "Steak and monitors aren't larger drivers of inflation
     
  4. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    The US Army is a term we used to describe a group of people and it's people that suffer the consequences or realize benefits, not the name we give the organization.
     
  5. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    Perhaps you should take up the argument with Warren Mosler. If you're interested I have his personal email address. Give me yours and I'll introduce you and we can discuss it with him. I'll yield to his expertise on the matter. Interested?

    We can come back and share the results of the conversation with the group? What do you say?
     
  6. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    bringiton,

    I don't find debating with you particularly interesting nor do I think you do so in good faith. Your responses are juvenile and sophomoric. I don't have anything left to say to you that I haven't already said. I'm going to drop Warren Mosler an email and ask him directly what he thinks and I'll share the results with the thread.

    -Cheers
     
  7. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    As promised....

    upload_2020-7-4_22-22-22.png

    Warren is a man of few words, especially when replying from his cell.

    I'm going to stick with Wray and Warren on this, not bringiton.

    -Cheers
     
  8. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    (Note my underlined)

    Yes, definitely; you and Greenspan (!) are spot on, MMT'ers to the core...

    Surely it's irrefutable, plain common sense (if you are not blinded by orthodoxy)?

    My scenario was a catastrophic health emergency requiring lock-down of the entire non-essential economy. In fact right on cue in Melbourne today, the state government has locked down 9 public housing towers; we are not talking about whether those people can buy new TV sets or steak dinners.

    I can assure you the people living in those towers in Melbourne do not regard the situation as "flippant", re their enforced lock-down by the state government....

    Yes the whole rotten ideology of neoliberalism must be brought down; hopefully this pandemic will expose the lies of, and loosen the terrible grip of neoliberalism on the less well-off.
     
    Last edited: Jul 4, 2020
  9. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    Mosler: "and the $ is a government liability - a tax credit, and your asset that can be used to pay taxes".

    Is there a problem of semantics here?

    So if the government didn't issue the dollar, the government would have no liability to the citizens it governs?

    Or government IS the creation of a liability which it owes to the citizens it governs?

    This latter construct does seem like a statement of government created to serve the people; but of course government must also manage relations between individual citizens.

    I'll see if I can contact Bill Mitchell (co-author of the new MMT textbook) for his thoughts on the 'money is debt' issue.

    But as I said, the people in the Melbourne towers will need to be supported by government IOU's during the lockdown; and it's insane to think the only way the government can get those IOU's - to fund that support - is by borrowing said IOU's from private sector investors.
     
    Last edited: Jul 4, 2020
  10. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    But we are. Because the people that make, deliver, buy, test, repair, connect etc TV sets are all going to be affected. Those that can work from lockdown and have a job, good for them, but those that don't, their capacity to purchase available production, just got reduced. If it goes on long enough, plants stat to shutter, people get laid off and we find ourselves in a deflationary spiral. Now in steps the Federal government to provide dollars, that's great, but ONLY if the productivity exists to purchase. If people are on lockdown some portion of what can be purchased is going to be affected. That was my point. How it sorts itself out is anyone's guess. I suspect that as long as the staples are available in adequate supply, energy and food being #1, housing, medical care are probably next etc, then inflation experienced will be short-lived IMO.

    Ok, that is a strange reply. You said:

    And that's what I was responding too. The idea that it's "no worries?". Yeah, going to disagree, there is plenty to worry about, having dollars, as you know, does not ensure that real productivity will be available to purchase.

    That would be nice, huh? But I won't hold my breath, because as long as people are so blissfully unaware of the system that we have and how it works, I wouldn't expect meaningful change. That said, creating $2.4 trillion dollars in the span of three months to deal with the p[andemic seems to lend a lot of evidence to the idea that during a non-pandemic year we could just as easily create another $2.4 trillion to pay off college debts for those at or near the bottom, oh and with what's leftover provide healthcare for everyone and probably still have money left over to go to the moon or something...lol
     
  11. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    In monetary terms, no, but in other terms...Perhaps?

    Mosler points out that there is a distinction between doing work and having a job. The latter introduces us to the states of employment/ unemployment as most people have to acquire dollars to meet obligations created and enforced by the government. Once those obligations are acquired, the government in turn has an obligation to accept dollars as payment of that obligation.

    If I create an IOU (for some good or service) the holder of the IOU is entitled to whatever the promise is. That means as the creator of the IOU I am in debt to the holder until they redeem it.

    The government just goes one step further in that it requires that you acquire the IOU in the first place.

    Please do, I'd be really interested to know his take. I might reach out to Steve Keen as well. Though he's not an MMT'er by name, I would trust him to give an honest critique of the idea.

    I can also reach out the Steven Hail and a few other less-known academic MMT'ers.

    Well, you and I know better.
     
  12. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    Indeed it seems we agree more than we think - or at least more than I have thought during this debate.

    eg, will you agree government COULD create IOU's at no expense to itself, .....limited only by the required/available resources and the nation's productive capacity?
     
    Last edited: Jul 5, 2020
  13. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    My point is: the main reason for the growing panic among the population in this pandemic is their perceived need to return to work ASAP to get money. Fact is the government can supply all the money they need over an extended period of time, while ensuring the productive capacity of the economy remains intact.
     
    Last edited: Jul 5, 2020
    Econ4Every1 likes this.
  14. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    An IOU is by definition an obligation (a debt), what makes the government's debt different from most other debts is that non-fiat money obligations, shells, cigarettes, or gold coins are that, to spend those forms of currency, the government would have to acquire them first to use them, but with fiat, the government does not have to acquire IOUs in order to spend them, it can just create them. So the debt the government owes is always equal to the IOU's it's created and circulated which means that in the grand scheme of things, the government's debts always net to zero. The "public debt" is nothing more than an accounting of the money that's been created and circulated that the government is obligated to accept in tax payments that it has decided to levy. Of course, the goal of the currency is to ensure a working financial system, so the government almost always spends more than it taxes so that it's debt and the financial assets it creates exist in perpetuity.
     
    Last edited: Jul 5, 2020
  15. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    So, somehow, A has a debt to B that is discharged when B gives his asset to A??

    I rest my case.
     
  16. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    Are you serious?? And here I thought I was delivering a reductio ad absurdum coup de grace...
     
    Last edited: Jul 5, 2020
  17. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    More on the difference between 'Modern Money' and MMT:

    (with acknowledgements to a contributor, on Bill Mitchell's MMT blog )

    What Positive Money folks think is “debt” is too naive, they regard tax obligation (the obligation of the government to redeem it’s currency for tax extinguishing) as not a debt, but they’re wrong.

    This understanding seems unique to MMT and maybe some post-Keynesians. No other school of economic thought recognizes this, apparently. If they do they do not put it in their textbooks like Mitchell, Wray and Watts do. To my mind this makes all the others schools of economics fantasy studies.
     
    Econ4Every1 likes this.
  18. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    I.e., honest.

    No, they're indisputably right. The debt in question is indisputably owed by the taxpayer, not the government. By MMT "logic," the fact that my credit card company is obliged to accept legal money in settlement of my account is a debt they owe to me. It's just transparently absurd Alice-in-Wonderland nonsense.
    Thank God.
    Right. Because it's self-evidently bull$#!+.
    The fantasy studies would be the ones where A's debt to B is somehow settled by B giving his assets to A.
     
  19. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    Difficult to disagree with this when presented in those terms. .

    I notice the MMT supporter (in Mitchell's blog) described the MM view as this:

    "they (MM) regard tax obligation (the obligation of the government to redeem it’s currency for tax extinguishing) as not a debt, but they’re wrong".

    Notice that a 'tax obligation' is described - in that sentence - as the obligation of the government to redeem its own currency for tax extinguishing.

    Now while that is obviously correct, if a 'tax obligation' is defined in that manner (bolded above), it does seem a redundant statement because obviously the government will accept its own fiat money for extinguishing tax; and acceptance is not the same as obligation.

    I agree the term "tax obligation" would normally be understood to mean money owed TO government.

    However if Mosler and Wray want to say money is debt as in:

    "and the $ is a government liability - a tax credit, and your asset that can be used to pay taxes"
    .....I'm OK with that, because "money is an asset that can be used to pay taxes"
    which is another statement with which everyone would agree.

    So apparently money is both an asset and a liability...that seems to be the tricky bit; but in any case - frankly - I DONT GIVE A DAMN how you define money if it is going to lead to confusion.

    The public already think their money is not the government's money...and consequently the public resents paying taxes...

    But the significant point - which most people don't know - is that government doesn't need to tax (or borrow) in order to spend.

    [In MMT, taxation has other functions.]

    But because all money is an IOU, government money that is used by citizens to pay tax is also an IOU ('debt').

    "One way to conceive of money is as an IOU (“I owe you”) that is denominated in a nation’s unit of account and deemed acceptable by somebody other than its issuer. Anyone can attempt to issue an IOU. The difficulty, as the economist Hyman Minsky emphasized, is in getting it accepted".

    In any case, in light of the above, I'm satisfied it is not valid to reject MMT - as you have done - on grounds that it regards money as debt.

    Fact is government can change the digits on the bank accounts of citizens as required by policy, without taxing or borrowing from the private sector), provided adequate available resources and productive capacity of the economy exist.

    That is the important point.

    btw, are there any implications for Geoism, whether money is regarded as an IOU or simply an asset of the holder?

    ie can we agree money is an IOU and a asset at the same time?

     
    Last edited: Jul 6, 2020
  20. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    It's only a liability in the double-entry accounting sense, like a company's retained earnings. Think of a company that produces a product with a high margin, like software. It spends $10K to produce 10K copies of its software, which it then sells for $100 each, for a $990K profit. In double entry accounting, that $990K in additional assets has to be balanced by either a reduction in assets or an increase in liabilities elsewhere on the company's books. Typically it becomes retained earnings, a liability of the company because it notionally owes that money to its shareholders -- but only an idiot would claim that the more profits a company makes, the deeper it is in debt.

    Now apply the exact same reasoning to the government issuing debt-free fiat money: it creates the money at very low cost, and it is listed on the books as both a cash asset and a liability of some sort, because that is necessary to make the books balance. It doesn't mean the government owes anything to anyone. When it spends the money into circulation, the asset is gone, and again, the books have to balance so the government will either record the reduction in liability (i.e., both asset and liability are gone, so the "debt" no longer exists in any form whatever) or post an increase in some other asset. MMT merely mistakes this bookkeeping sleight-of-hand for reality. It isn't.
    Debt is both an asset and a liability. Some kinds of money are debt, others aren't, as I have proved.
    The public quite rightly resents paying unjust and economically destructive taxes like income tax and sales tax.
    Debt-free fiat money can be issued with no IOU.
    That's just one of its problems. Another is that it erroneously treats unused resources as available with perfect elasticity. A third is the JG.
    I don't think so. The important factor in the geoist analysis is breaking the economy's addiction to private bank-issued debt money. Until we do that, we can't address the problem of landowner privilege because without privilege, there is nothing for the private banks to lend for or against, and absent MMT-like money issuance (Positive Money is better), the result would be a deflationary collapse.
     
  21. a better world

    a better world Well-Known Member

    Joined:
    May 8, 2016
    Messages:
    5,000
    Likes Received:
    718
    Trophy Points:
    113
    OK my brain is hurting...no worries... I just want the government to change the digits in my bank account - if I lose my job - without creating a debt (or demanding 'austerity') for taxpayers in the future - or enriching bond holders in the future.

    Yes, and MMT doesn't need to issue taxes to raise money so government can spend; though some appropriate taxation might be required if demand on the nation's resources becomes excessive.

    Now would be a great time to introduce MMT; indeed if this pandemic hangs around for longer than expected, central bankers might have no choice but to become MMT'ers. Then the problem of "elasticity of available resource" could be researched and dealt with.

    As for the JG: in a world of plenty, it's both a right, and a responsibility, to participate and contribute to the nation's economic life, whether in the public or private sector, according to one's ability. (Wealth of course is more than mere money, which in fact is an illusion after all..whether 'debt' or 'non-debt').

    No doubt correct.
     
  22. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    The only way to get into a movie theater is with a ticket. The ticket is the currency of that system. When you hold a ticket the theater is in debt to you a seat in the theater until you redeem the ticket. The ticket is a debt, what the theater received for the ticket is the theater's asset.

    As I explained before, there are instances of companies in early America buying labor with credits it created redeemable for goods at the company store.

    So the credits purchased labor, an asset to the company and the credits were a debt. To the laborers, the credits were an asset to the laborers and a debt to the company until redeemed.

    The US government purchases goods and services from people with dollars. The goods and services the government receives are an asset and the dollars are a liability (debt) until redeemed.

    Not sure why this is so hard to understand.
     
  23. Econ4Every1

    Econ4Every1 Well-Known Member

    Joined:
    Jan 3, 2017
    Messages:
    1,402
    Likes Received:
    302
    Trophy Points:
    83
    There is never, ever a requirement for austerity or onerous demand for payment from future taxpayers! That is neoliberal thinking.

    The government created it's debts from nothing and acquired real goods and services with them. The need to tax has nothing to do with acquiring money it creates to have money for future spending. I already quoted Ruml explaining the use for taxes. One of them is that taxes are an instrument of fiscal policy to help stabilize the purchasing power of the dollar. That means that taxes can be use to maintain the scarcity of dollars.

    Think about it like this. If you fill your bathtub almost to the top and the drain is closed, you are limited to the amount of water you can add before the tub overflows. But what if you wanted to keep adding water? Simple, you open the drain equal to the amount you turn on the faucet. Water out equals water in. In this way, you can add new water to the system in perpetuity without causing the tub to overflow.

    But, what if (and here is where you have to use your imagination) the tub became a little bit bigger each day, you'd have to open the faucet a little more than the drain in order to maintain the same level of the tub.

    For the government, the economy becomes larger through a combination of the increasing population (110 million net new people since 1980 (that's more than 33% more people) and you have to factor in advances in technology which means that each person is more productive, about 2.5 times more compared to 1980). That means there the equivalent of roughly 250 million more people in the US if we are using 1980 as the benchmark. That means in order to keep people employed the economy and the money used to keep it running needs to increase.

    If the economy is the bathtub the government fills it with dollars, but it can't just add new dollars, it has to have a system to remove them as well or the economy will experience inflation (overflow).

    Now, if you followed that at all, the difference is what we call the deficit and the debt (which is all past deficits combined) is something different when looked at from the "eyes" of the private sector. We are only looking at things from the government's point-of-view and that is the (neoliberal) mistake. To you and I, the debt should be seen as the national surplus because it represents all of the dollars the government has created in excess of what has been taxed. The banking system clouds this a little bit, which is why it's important to understand how banking adds what I'll call temporal money or credit, but that's probably too much to bite off if you aren't familiar.

    This entire argument seems to me to be largely semantic because there seems to be some fear that the "debt" the government amassed has to be repaid and that repayment will cause hardship. Some taxes need to be collected, but not so much that austerity is necessary.

    The only reason taxes would ever be a burden is if there were a real decrease in the supply of goods and services, especially those goods and services that people need. Things like energy (in all its forms), food, land, medical care etc.....
     
    Last edited: Jul 7, 2020
  24. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    No it isn't. It is just a receipt, and can't be exchanged for anything but a seat, or perhaps a refund.
    Because YOU PAID THEM and have not received what you paid for.
    No, the ticket only certifies the theater's debt to the customer. If we look at the theater's books as of that moment, the customer's payment is an asset, and the associated liability is the theater's obligation to provide a seat, a deliverable.
    Labor is not an asset as it cannot be liquidated. The asset is whatever the labor produced. You are just factually incorrect.
    Right, because the company was OBLIGATED TO GIVE THEM SOMETHING in return for the credits.
    Nonsense. The dollars WERE an asset of the government until it gave them to the providers of the goods and services. It simply exchanged that asset for the goods and services assets. No change in liabilities involved. The dollars don't have to be "redeemed" for anything. The government owes the providers of goods and services exactly nothing on account of the money they hold, because IT ALREADY PAID THEM.

    I'm not sure what is so hard to understand about that.
    It's not hard to understand what you said. It's just factually incorrect.
     
  25. bringiton

    bringiton Well-Known Member

    Joined:
    Mar 11, 2016
    Messages:
    11,394
    Likes Received:
    3,008
    Trophy Points:
    113
    I missed this before, but Econ4Every1 has been repeating some incorrect information.
    Because YOU HAVE PAID THEM and they have not yet delivered what you paid for. When government spends fiat currency, it is PAYING FOR those goods and services, and thus owes nothing to the holder of that currency.
    Because you gave the company your labor services in return for its OBLIGATION to pay you goods of your choice at the company store. Government undertakes no such reciprocal obligation when it pays its employees and suppliers. The payment of fiat money DISCHARGES the government's debt, it does not INDEBT the government to the employee or supplier!
    The government does not undertake to give its employees and suppliers anything BUT the currency, and will not give them anything but a receipt in return for that currency when they remit it to pay their taxes.
    Again, what does that even mean? What "redemption of tax debt"? A tax debt is what the TAXPAYER owes, not the government, and the government owes the taxpayer exactly nothing in return for payment of his taxes in fiat currency, other than a receipt.
    No, that is only one aspect of the real reason: a payment of fiat money legally discharges ALL debts, public AND PRIVATE. Any court-ordered award is settled by a payment of fiat money, and the plaintiff has no further recourse. He MUST ACCEPT a fiat money payment in settlement of whatever debt he is owed, or get nothing.
    No, I am objectively correct.
    But what you use to SETTLE that debt is not ITSELF necessarily debt. Let's say I owe you an apple. Eve has an apple, which I think you will agree is not debt, and she gives it to me in return for killing the snake in her garden. You want a snake to make a belt, so you offer to settle my apple debt to you by accepting the snake's carcass instead of an apple.

    At what point did the snake's body become DEBT?
    Wrong. What's important is the specific identity of WHAT is being created. An IOU (from anyone but a bank) only undertakes to pay in the future. A check EXECUTES the payment NOW.
    =
    No, it is most certainly not.
    STABILIZING the purchasing power of the dollar is in no way similar to TRANSFERRING purchasing power from the private to the public sector. For one thing, the latter can be effected without using any dollars, through taxes in kind.
    No, untangling your knotted skein.
    That's even worse. Of course risk increases the amount of interest one must pay, but that is not the basic reason for interest: the greater perceived utility of current over future purchasing power.
    Understanding interest is part of understanding money.
    I think in general debt should be discouraged for, in Dr Strangelove's delicious phrase, "reasons which must be all too obvious at this moment."
    No more than a dead snake is.
    If only!
    That is not a definition.
    It's still not grammatical, and no, when the government pays its employees and suppliers in fiat money, that DISCHARGES its debt to them, it does not INDEBT the government to them.
    No it isn't. It owes you exactly nothing.
    <sigh> You ALREADY PAID FOR the services the arcade owes you. You DID NOT pay the government anything for the dollars you hold.
    In return for PAYMENT of those dollars. Not just for holding them. It has no obligation whatsoever to people who merely HOLD fiat dollars, which proves those dollars are not a debt. They are only useful for SETTLING whatever debts the holder may have as a result of taxes or any other obligation.

    In double entry accounting, every asset has an associated liability. They have to be equal for the books to balance. But in reality, many assets have no associated liability. I.e., they are owned by someone, and can (by definition) be liquidated to SATISFY a debt, but are not themselves something that is owed to anyone: a house, a car, a gold coin, a painting, etc. Once you grasp that double entry accounting is just an information processing system, not reality, the nature of the accounting sleight-of-hand that MMT mistakes for reality becomes clear, as does the possibility of debt-free fiat money.
     

Share This Page