It was bound to come to this, and right on time too.
Outgoing ECB President Mario Draghi says the ECB Should Examine New Ideas Like MMT
European Central Bank President Mario Draghi said the Governing Council should be open to ideas such as Modern Monetary Theory, while noting they’re closer to fiscal policy and should be directed by governments.
Draghi was responding to a question from European lawmakers about helicopter money and the best ways to channel funds to the economy in a way that helps inequality. He mentioned MMT and a recent paper by former Federal Reserve Vice Chairman Stanley Fischer — the adviser on Draghi’s doctorate — which said central banks should put money “directly in the hands of public and private sector spenders.”
People’s QE
Putting money directly into consumer’s hands is a people QE, and ignoring government deficits on the theory they don’t matter is one of the tenants of MMT.
“These are objectively pretty new ideas,” Draghi said. “They have not been discussed by the Governing Council. We should look at them, but they have not been tested.”
Not Been Tested?!
That’s not exactly true. Japan wasted trillions of dollars building bridges to nowhere and it solved nothing. The best one can say is Japan has not imploded yet.
Of course the MMTers will respond Japan did not do enough MMT, as if building more bridges to nowhere would actually solve problems.
Dam the Rules, Tests Ahead
“When you look at them closely, you realize the task of distributing money to one subject or the other subject, that’s typically a fiscal task,” he said. “It’s a government decision, not the central bank…It’s the political governance of these ideas that needs to be addressed.”
Draghi knows full well that both ideas he espouses testing are against the Maastricht Treaty on which the Eurozone was founded if they were done in a large enough size to matter.
But Draghi simply does not give a damn.
Why?
- It’s not his problem. His term ends October 31, 2019.
- The Italian banking system is insolvent so we need new “creative” ways to fix things.
- What better time than now to propose such actions when you can dump the new ideas on hand-picked replacement clown Christine Lagarde?
Fundamental Falsehood
One fundamental assumption of MMT (and an obvious false one) is that governments will do wise things with the money they create out of thin air.
History shows the asininity of that theory.
Mike “Mish” Shedlock
Fiat always becomes worthless, thanks to economists for continuing the tradition.
Does everyone really fathom just how really fucked we all are? What used to be a serious thing (sovereign money) has now turned into a complete joke, a circus, a thing of derision. I don’t know how much longer they can keep this up but I do know when it collapses it is going to leave a mark on all of us.
MMT does not state that deficits don’t matter. It purports to describe actual current practice of finance/banking in a Central Bank fiat system. On the way, it demolishes a number of common but erroneous nostrums which contravene established accounting identities.
Any policy prescriptions are seen as political choices, not driven by esoteric technical “economic” rules, but as decisions about what you want to accomplish. No MMT-ers thinks Mozambique can be rich tomorrow by “applying MMT” and running deficits. That is a s t r a w m a n.
Supporting people’s QE is not a corollary of MMT. It does seem like it would better engender the inflation CBs claim to want, but of course they will never do it, because the inflation has to benefit the money “insiders”.
Giving money to the “speculating” community is a choice that mainly benefits the “house” and concentrates the pool of income producing assets in fewer hands, but would never pass a referendum, probably losing by 99% of the vote. But QE very much proves that MMT is correct, even if many MMT adherants do not favor it as a good choice.
It is always disappointing when critics of MMT make false statements they claim to be MMT, and then criticize that lie in order to justify their own opinions. Never do they bother to ask any MMT economists like Stephanie Kelton, Randall Wray, or Fadhel Kaboub. Even a YouTube search of those names and subject would provide correct MMT information. But, MMT critics, even those “left of center, ” are operating in a Neoliberal space, knowingly or not, by not understanding what is described by MMT analysis. Without an understanding of MMT, you are just supporting false RightWing economics that are intended to prevent progressives plans.
Maybe it is to recognize that FRB has its limits too. Exponential money stock (debt growth) and population growth could somehow balance each other but things are changing. We can think creatively and find a new path.
Maybe we should set limit to the size of GVT to GDP in the constitution (20%?), maybe we could have instead of interest rate, tax rate and the lender would get a % of that? Maybe we could have an independent treasury department which could just print money on a yearly basis as a limited % of GDP and have it put as reserve to all money lender intermediaries. Maybe all loans should be centrally registered in a common ledger at the treasury so we would have a clear view of the overall principal , interest and average maturity owed. Maybe we could greatly simplify and almost abolish income tax too and or replace it by a small transaction tax. Maybe equity investment should be favored and dividend not taxed. Most are saying that the system is doomed and somehow are right because the GFC brought to light the limit of the system. However…. I just see critics to whatever potential solutions starting to emerge. The doomsayers are right in their assumptions and wrong in their attitude since they have a very hard time about rethinking the system. Ironically, whatever path we might decide for our future, the destruction of the value of money is certain if trust goes to hell.
All the treaties creating the EU have been violated, the whole thing has become a global joke. The EU bureaucrats don’t take themselves seriously and don’t even pretend to care about the laws that they themselves wrote.
Most of Europe never voted to create the EU in the first place; which makes it all the more funny when the UK politicians hyperventilate about how best to nullify the Brexit vote. Its the only vote they have pro or con.
Brexit will probably happen before the EU dissolves anyway… but maybe the whole thing implodes before Parliament accepts the inevitable. I’ve stopped following Mish’s posts about Parliament’s latest act of desperation. It doesn’t matter which side of the Titanic sinks first, its all going down
The real issue is whether the effects of the next recession are felt before or after the next recession. Impeachment is a sideshow.
MMT has the same cautionary take as does the mainstream. Nobody, whatever the theory in politics, can be trusted. IF MMT is asinine what would you describe the neoliberal mainstream theories?Liberal, Evil?
MMT has shaken up the mainstream, and bankrupted its core precepts. More and more will come around, because it is an accurate explanation of today’s economics.Therefore it cannot be disproven. You’ll need to understand it or you will be left behind and become irrelevant. Your choice! I’ll be watching.
To me whatever money system has to fall under quelling the global population of 7.2B and counting. There is a lot of pretending going on ..and that is okay !
We complain a lot about socialism on Mish’s board but I gotta tell you we’ve been experiencing a lot of socialism for the rich in this country for quite a few years now. I myself have been both a saver and a risk taker, about to start my 19th business at 59, and it has been both heart breaking and infuriating to watch our economy being managed in such a way to where highly leveraged borrowers buying passive assets have been richly rewarded while those of us trying to build entities that hire employees and make or provide stuff are screwed every way possible. Between massive asset inflation, hyper regulation of small business here in Cali, and the difficulty to access capital I’m thinking seriously of shining off the business idea, selling the prototypes, buying a van and hanging out with the millenials who’ve dropped outta the rat race living in their vans in the nicest parts of this country.
The ECB can ‘investigate’ all it wants.
I am sure that Largarde would love to try MMT to keep the United States of Europe dream on the road for a little longer.
The problem is the Bundesbank, and the rise of AfD in Germany.
The ECB needs the Bundesbank to give itself credibility, and the Bundesbank won’t agree to MMT:
So it’s not going to happen.
FWIW, can’t be done in US (because it would destroy UST market, which US needs to fund the deficit).
But could, possibly, be done in Japan…I’m not sure how much it would achieve though, suspect JPY’s would be directed far more to paying down debt than buying goods and services (and thus stimulating economic activity).
“When you look at them closely, you realize the task of distributing money to one subject or the other subject,”
Well, at least he’s honest enough to be beyond pretending it’s about anything other than crassly distributing money to the rulers’ favored SUBJECTS……
People’s QE is the last ditch desperate attempt of central banking fakery before the collapse, which will be hastened by it. The poor will spend it and some more of course, the reason why they are poor in the first place.
They may go on for a long time before they move from words to actions. Bernanke was talking about helicopter money in 2002.
tenets
Do you feel better now you’ve pointed out a typo? Does it make you feel superior?
Do you feel better now you’ve posted your moronic reply? Does it make you feel superior?
I feel great man…..thanks for your concern!
This is a common mistake these days. I gave up a long time ago correcting it.
It’s irritating. Another one, more common and a even more irritating is “per say”. I immediately want to stop reading when I see it.
Unfortunately, it’s usually not a typo, but ignorance.
Apparently, Mish cannot edit his own posts, just like the rest of us.
Not all spelling mistakes/typos are created equal. Tenants is a pretty amusing one.
Power of the Purse
Legislative bodies would lose control / power of directing where money flows … not sure that is something they would want to give up. Ever.
MMT is MORONIC
Draghi / ECB can wax about MMT all he wants, but nothing will happen unless the EU member state legislative bodies on board (and won’t it have to be unanimous?). Central banks anywhere are just an institution populated by a few hundred / thousand bankers and economists. They have ZERO logistical capability. They will need names / ID #’s / addresses, etc of hundreds of millions of households. Member states will have to provide.
It will CRATER business. Many (all?) receiving a check in the mail will pull the “take this low pay dead end job and shove it” maneuver. Good luck spending your check when businesses everywhere close down … along with their tax revenue.
The logistics of something like this is a very interesting point. The systems do not exist to allow Draghi to send out 100 Euros to every citizen living in the Euro area even if he wants to, and such systems would take years to build. He would be trying to order tanks into battle that do not exist.
Time to dust off The Dollar Crisis: Causes, Consequences, Cures by Richard Duncan. He basically said it will go one of both ways- hyperinflation or deflation. For a few years we seemed to be on track for deflation, but looking like inflation will be forced upon us
Why not both?
Deflationary bust very near at hand. Any large scale MMT is still a couple of years down the road (imo).
Madness is spreading like wildfire now. It may be unstoppable. I have watched warily for some time now, and taken no real actions with my assets, but I may now be forced to move all of it into physical gold. Once MMT gets started, you won’t be able to stop it- if a trillion isn’t enough, then they will just keep going until it all blows apart in a massive hyperinflation that destroys any purely financial asset.
MMT is happening right now technically in the United States. Trump has shown the world that running a trillion dollar deficit forever has no effect on inflation.
You are an idiot, Jon- I have read your comments here for years. No, what is happening is a disregard for debt accumulation, not MMT. With MMT, there is no debt incurred on the books. The US isn’t Zimbabwe yet, MMT will turn it into Zimbabwe, though.
Not disagreeing. Just wondering, if debt is continually rolled over, increased, and issued with no intention to repay it, how is it different than MMT?
The difference is someone is collecting the interest, and the rollovers have economic actors buying the newly issued debt by forgoing immediate consumption. MMT is just printing money and handing it out with the idea that the money supply can be contracted by taxes. The problem is that this is never how it actually happens- it always ends up in hyperinflation- the taxes never catch up to the printing because of the public choice incentives.
@Yancy_Ward: I appreciate your reply. Taking a serious look at this, does someone collecting interest really make a difference if the interest is 0% (or at any rate below deficit spending as a percentage of GDP growth sans government)? If the rollovers are purchased with newly issued debt, then no-one is forgoing consumption. These things seem like a distinction without a difference with respect to MMT and how our system is actually being run. The only material difference I can see is that there is still the possibility the debt could be directly defaulted upon rather than defaulting strictly through money dillution / new credit issuance. I think it is safe to assume direct default will never be allowed. So, current US policy is in effect indistinguishable from MMT, yes?
To clarify, I meant to state that if the nominal interest rate is less than government’s deficit spending contributes to GDP as a percentage of GDP, then the real rate of interest is less than zero and the difference is money that was monetized instead of being paid back. There must be a shorter way to state that correctly, but at the moment I cannot think of it.
It’s not a disregard for “debt accumulation” in the traditional, intuitive sense; where the debt is understood to at some point requiring some sort of payback from real funds. But rather, it’s a bet than Central Banks will print whatever is needed to service future debt. Otherwise, like the idiots have been told to fear above all else, “the syyyystem will collaaaaapse.”
Wheter branded MMT, or QE, or Bailouts, or “liquidity injections”, or most accurately, just “counterfeiting”; printing money is printing money. The rest is simply obfuscation.
And yes, MMT will lead the US to become Zimbabwe. And MMT is no different from any other means of printing, including “preventing a liquidity crises.” Ergo….
No, MMT does not advocate simply printing money. It advocates running high enough budget deficits to be able to use fiscal policy to stimulate the economy. But then I’m an idiot, so what do I know?
Drahgi’s outgoing statements are like a drug dealer promising free drugs to all his customers as he sails away to live a life of luxury in some other country. These statements cost him nothing and possibly buy him political popularity. The long term economic results of people’s QE would of course be disastrous if ever fully implemented, but that will not ever be his problem. If it becomes policy and he is ever interviewed years down the road, he can always say that it was not done “correctly.”
It is a sad situation that we do not have more responsible people in these critical positions.
Its sad these critical positions were created in the first place.
Touche!
Any “critical” position will never be filled by anyone wasting even a single millisecond concerned about anything else than simply being chosen for said critical position.
It’s no different from military dictators. You simply don’t win out over all the other punters for the top spot, unless you beat them at doing whatever it takes to do so. Which doesn’t really include holding hands, all getting along and singing Kumbaya. It’s not just happenstance that “we unfortunately didn’t end up with a nice dictator in Iraq.” No matter how surprising this may seem to inevitably stupid progressives.
Demagogue: a political leader who seeks support by appealing to the desires and prejudices of ordinary people rather than by using rational argument.
Whatever it takes.
Called a politician.
It seems we are on the road to a place where money will no longer have any meaning..
Except for one, certain kind of “money”.
“Dam the Rules, Tests Ahead”
Rules go out the window in a crisis. Draghi is admitting there is a crisis.
….And if rules are allowed to go out the door in a crisis, those who benefit from no longer being bound by rules, will ensure, with 100% certainty, that there will forever be a crisis.
“Outgoing ECB President Mario Draghi says the ECB Should Examine New Ideas Like MMT”
MMT is not a new idea. It is just a new lipstick on an old pig.
Effectively, it is not any different from what has been going on since the dawn of central banking. Just more progressive Newspeak, IOW.
Once you start printing (electronic) “money” and giving it away, does anyone think that this so-called “money” can also be used to settle international trade transactions? Wouldn’t this quickly lead to a situation where “He who prints the most “money”, gets the most stuff”?
I think Mish pointed this out recently…real money is savings, deposits etc. Everything else is just dilution of this understanding we used to have about what money is. These are horrific, yet interesting times. I feel like we’re witnessing a historic event and I’m both terrified and curious about what will come of this. I try to remain positive, but it’s hard when things went from bad to worse in more than 10 years.
If you read link to stevenguinness2.wordpress.com and his recent posts on the digital currency agenda that is one route that might be taken. Traditionally (re) imposition of “state” values or definitions of money is accompanied by discord at international level and by domestic “discipline’ ( not always in the good sense) . This has happened with the previous latin monetary union which mostly ended at WW1 – countries argued or cheated and went their own ways. Not the fault of that union per se, but of corruption and national limits that were not accepted – in short a desire to control money/ control with money. A single global soft currency likely no different, and unless backed by say gold, such currency will always somehow be soft/political.
This would of course result in a huge drop in the average American’s standard of living, since running $650 Billion/year trade deficits ad infinitum would no longer be possible.
“Wouldn’t this quickly lead to a situation where “He who prints the most “money”, gets the most stuff”?”
Duh!
Why do you think idle (or makeworking) banksters, “homeowners,” “investors” and other direct beneficiaries of the printing which has been going on for over a hundred years, and accelerated massively over the past fifty, are the ones who currently have the most stuff?
If this jester didn’t have the power he has, I wouldn’t even take these words serious. He’s on his way out, pay no attention to this wreckingball. But, by his hand, he destroyed social cohesion, distort monetary principles and force risktaking on aspects of finance that should never take risks or overleverage to the hilt. Now, his successor is even worse and unless the voters demand it, they’ll continue to run this thing into the ground. Remember Bernanke’s desperate three-quarters of a percentage point rate-cut? That was the first sign of panic, just as we’re seeing panic right now with the Repo-farce and the QE-disaster the European CB. Either the whole thing is about to pop or these are the first visible cracks. Either way, this is not sustainable.
There is no saving it now. Seriously. There is nobody who can come in and fix this. They will kick the can down the road until it collapses all of a sudden and then liberal morons will cry and say they never saw it coming.
Oh I think they’ll blame the populists and the political right. I hope I’m wrong and I hope all of us won’t experience a collapse.
If you start it, you will never be able to stop it.
It started well over a century ago.
And yes, it seems you are right.
Say 1Trn to 200M recipients over 18.
Do the math. Shock and awe needed too to make a difference.
20Trn?
1Trn might be enough to move the needle. They could put conditions on to pay debt, save or spend on EU products not imports.
“They could put conditions on to pay debt”
That’s what current QE effectively is: Just a simple handout to banksters from the rest, in exchange for nothing at all, aside from some bribes and lobbying cash.
Not quite the same as in this case the debtor (citizen) can have partial credit rating improvement and personal debt reduction.
QE kept it all “in the family” and debt slaves didnt get a look
And with that improved credit rating, comes access to more loans. Which, given current development restrictions, results in no improved access to anything, only higher prices for the same old things. Bringing us right back to square one again. Just with banksters having another pile of sales commissions handed to them, in exchange for selling new loans.
A simple condition – tighten lending criteria. Back to the 70’s. People QE, done in the round, can be more beneficial than current QE but there needs to be other actions to to bring down debt, restrict issuance of over easy credit and spur frontline demand for goods and services after debt begins to be addressed.
At least the money goes to people to help liberate them a little and not those with a nose in the trough already.
Banks get capital and lose interest income but its already low. People get lower debt burdens etc.
Bottom up rather than top down.
All free money is a scam but some more scams than others.
Money could be earmarked as must be spent to pay down debt first. Steve Keene has espoused this for a long while and there is some logic. Bottom up rather than top down.
Most NPLs are probably corporate though.
Just woke and reading your replies to this interesting development. Tester, I was going to mention Keene and here is a link to his idea, for those interested here is his web page: link to debtdeflation.com
In a nutshell he wants to have a sort of jubilee, or if you prefer a sort of chapter 7 for some level of personal debt that does not shaft either the lenders or the borrowers being relieved.
He proposes that all households be given a certain amount, call it a quarter million, yet to be determined but along those lines, however; that money must be used to pay down debt first, this avoids the moral hazard of screwing over savers who never went into great debt (like me). I would be pretty p.o.ed if people who are spendthrifts were handed a chunk of money to cover debts while people like me that avoided debt got nothing. We all would right?
My current debt is simple to calculate, I only owe for one thing, my auto loan, currently at $15k and change. Maybe $400 on a Visa but that is paid every month. So, when they roll out this jubilee my 15k debt would be paid off and I would get the balance. To buy whatever I like with, though I know what I would do, use a couple hundred thousand to buy a modest home.
The tricky part I think would be how to administer it, nearly all loans are reported to credit agencies like Experian, not foolproof for ever person, a few million would have to wait because they were victims of identity theft for example, can’t use this to pay down the theft by crooks. But, overall it could be done.
If you are open minded this could actually be a great thing, it would cure a number of problems that are pressuring our society, like medical debt, like student debt, it does not fix those things forever as a cause of problems, that we would still have to address so we are not just right back in the mess we have now.
But, it would take the wind out of the sails of the socialists who are an existential threat to capitalism. Just this morning Bernie Sanders as reported by CNBC says billionaires should not exist, and I cannot say that I don’t agree. A billion dollars is a lot of capital to be under the control of one person. Too much money in too few hands strangles the formation of capital pools required to keep capitalism healthy.
Two years ago I came across an article that said the 7 wealthiest people controlled more net worth than the bottom half of the population, last year that was updated to the top 5 wealthiest now having more than the bottom half, and as of today it is the three wealthiest having more than the bottom half, you cannot blame the bottom half for getting continuously poorer, it is wrong and you will piss off the bottom half if you do.
One of the major drawbacks of course is that this one time event would create inflation, and that is why it has to be universal. Because people like me on a fixed income and there are tens of millions of such people, will have to cope with that inflation, leave them out and they will just die homeless on the streets. You will have made the problems worse not better. People like Kamala Harris do not understand this, her UBI proposal would hand trillions to working people only, as a tax reduction, she does not understand that retired and disabled Americans would be left out with no mechanism to cope with the inflation. (anyone on a fixed income will tell you to varying degrees that government COLA’s do not come close to addressing any real inflation levels).
Money levels in the economy are relative, you can halve it, you can double it, by itself that makes little difference, if you do this you also have to address the reasons we got into such a bad place as we are. Those have to be repaired or there is no point in any of it. Call it a share process for the nation. The GDP the PEOPLE create through their labor have been chronically underpaid for their time and work, and totally cut out of the dividends the nation enjoys. A larger share has to go to the people who work and to those who can no longer work because they have been used up.
I know most will scream about this is socialism, but a softer form of socialism administered by capitalists is inevitable at this point, wealth inequality has reached that point, and you have a simple choice, do something to fix the problem or have it done for you by the ilk of Bernie Sanders who is going to crush capitalism and will not be nice to the rich at all. I believe in capitalism, I think mankind will die without it. Certainly anything worth having in life will be gone, you might be better off than slaves, but you will be no more free under the plans floated by socialists (and especially Greens).
The society that current QE looks after is the banksters, zombies and already wealthy society.
Just another form of socialism but for a select society.
I’ve kept an eye on Keene since about 2010. Some of what he says makes sense. Would have been better applied after QE1 though instead of QE(1+×).
Just lifting debt burdens of the majority would be a start and help improve sentiment. Also need to encourage savings so there begins to be a better build of capital formation.
Ultimate aim to return to a more ‘normalised’ credit environment. Rates that form a hurdle and reward savers. Even deflation could be allowed to do its job after debt reduced.
“People QE” walks like the old idea of printing money without any restraint. That leads only to inflation, possibly hyperinflation if done persistently.
Do I miss something?
You didn’t miss anything about People’s QE, but you may well have missed that any other QE is exactly, not in any way, shape nor form different in any way whatsoever. It also “leads only to inflation, possibly hyperinflation if done persistently.” There is no, none, zero, zilch difference whatsoever. Printed money is printed money. It not only “leads to” inflation. It is inflation.
The only way to keep up pretenses that there is a difference between different ways of printing money, is to exclude the prices of those things mostly inflated by current means of QE from inflation calculations, while including the prices of things mostly affected by “People’s QE” means. Hence why designated dupes are being indoctrinated to believe prices of beds have something to do with inflation, but prices of the house the bed is put in, nor prices of shares of the manufacturer who made it, somehow does not.
@ Deep Purple You missed the policy that integrates price deflation (Austrian’s wet dream) beneficially into profit making systems. And that is my 50% Discount/Rebate monetary policy at the point of retail sale.
money comes from nowhere
It is borrowed or printed into existence
Thus It does not represent savings
As a future claim to resources any kind of money is understood to represent savings, or storage of value. When that is believed by society it makes it true, because the resources mentioned are owned by society.
The money created during mmt comes from the saving of others, in that it competes with their own ability to claim and draws on the established understanding of what existing money represents, while at the same time adjusting the meaning of that representation.
I disagree to an extent, the printing of vast quantities of “electronic cash” handed out would be a form of savings, just seized from those that have it now and redistributed to others. Changing the monetary base to express smaller units does not change the actual quantity of savings.
If you have a total worth in tangible assets (savings) of say 20 trillion and you double the monetary base those assets are now worth 40T. But then liabilities are also doubled so there is no change and the assets thus devalued are still standing, ownership has not changed. Ditto if you slash the monetary base by half, the assets and liabilities are also slashed in half and again ownership is unchanged.
The contentious problem is the distribution of the assets and liabilities. For far too long the distribution of all new assets has gone to the investor class in the form of unearned income, dividends and capital gains (especially capital gains) as the CBs print, they have sterilized the new money base from Main Street to avoid creating too much inflation, because the very act of enlarging the monetary base is inflation. Channeling it to banks and corporations in mountains of new money to keep their game going while trickling it out to Main Street is reaching it’s end point and we all know it. Because incrementally the top 1% need ever larger injections of this new cash/credit to maintain “growth.” While the people are buried under the debt. All assets and liabilities must equal zero. If you are giving trillions to the investor class (remember that banks and corporations are not nameless faceless stone edifices, they are people, shareholders) then you are also giving the corresponding liabilities to the people. Socializing the debt and privatizing the profit. And because this is exponential we are reaching the point where the people will no longer tolerate it at warp speed.
What to do about it, how to manage this fairly, that is what the smart people want and why we seek contrarian web pages like yours Mish. We want a solution that works the best for as many as we can, without termination of capitalism. Because we know instinctively or by training that capitalism is what is keeping us alive in lives worth living. Socialism as far as I am concerned is a chickenshit suicide by slow death. A collective where you are told what you can eat, what you can smoke, drink, drive, where you can go, a politically correct nirvana of total lack of choice. We see it all around us. Someone once complained about under representation of people of color in TV and movies. So, now we see that the 13% of black people are making up about 30% of faces in those mediums. Some of whom can’t act their way out of a paper bag too, and it gets in your face as a form of punishment when they change white characters like the gunslinger in the Stephen King novels to Idris Elba, a slick street smart player. That was not the person in the books in any way. Or, I went to see a play at one of the finest Shakespearean theaters, Macbeth, where the lead was played by a 20 something black man. You do not have to be a racist to find this disturbing. It was an in your face example of casting a black man in a part that he just did not fit into. The inability to suspend disbelief made the more than 2 hour play an exercise in misery. The whole time felt like a punishment for being a white male. And, I would like to point out that if you took a major black character from history like Harriet Tubman, and cast Meryl Streep as she, wow, how long before there would be riots in the streets?
We are putting up with this voluntarily, if we as a group refuse to support this punishment they could not do it.
Good discussion, MMT as discussed so far by most still rips off the savers and rewards the borrowers because as in your example the money is devalued by 50% for the holders(savers) and the liabilities by 50% for the borrowers being unfair to both the saver and the folks on the other end of the liabilities. If there were a mechanism like what Steve Keen discusses or Andrew Yang is supporting so it’s fair it would be much better than QE and crazy low interest rates for stimulating demand. By gutting the middle class via Fed and tax policies we have sown the seeds of our own economic destruction.
Keith Weiner has been arguing that the quantity theory of money is wrong, or at best only has a grain of truth in it. If it were true, then the price of milk would have doubled since about 2007. But there is no Deity keeping track of the number of dollars in the world, and then making sure that what-you-get per dollar is in perfect inverse proportion. As he puts it: “People are not motivated by aggregate statistics. They are motivated by incentives.”
link to monetary-metals.com
Currency indeed comes from thin air. However it can only exist in response to debt. no debt= no currency. That’s the Federal governments right, direct from the constitution. Everyone else is a USER. Also Federal Taxes are not revenue. Banks are licensed to create money as well, but again, only in response to debt [mortgages] and as liability. No liability attaches to Federal currency spending.
who pays the interest on the bonds that are used to finance Federal currency spending?
money comes from a government department as a future claim on tax receipts, and it comes from private banks creating a ledger entry and loaning money they do not have on deposit
The federal government pays it just like any deficit spend. No account is debited. You get a check in the mail from the central bank, and it won’t bounce.
Pardon my dumb question, but where does all this money actually come from? I always thought wealth was created by applying human capital to stuff and ideas to creates goods and services other humans were willing to spend the wealth they created with their own applied human capital, but if you skip the part where wealth is created and start creating more store-of-wealth instruments that can be used to obtain it, you’re merely debasing not only the money, but also the wealth of the society as a whole.
The money comes from nowhere and exists as long as there are assets with which to trade money for.
Well I was taught that if you deposited £100 in a bank then the bank would lend £90 to enable the capital investment which made the economy grow and improved living standards for all. All that is now obvious bollocks because as Mish says it is conjured out of nowhere at the click of a keyboard. We are told there is no inflation, because Governments of all sorts don’t count in their measurement of inflation what inflation there is ie rents, house prices and stocks and bonds. It is all smoke and mirrors.
Touche!
“wealth was created by applying human capital to stuff and ideas to creates goods and services other humans were willing to spend the wealth they created with their own applied human capital” up until fiat money allowed wealth to be obtained by those with privileged access to the money printers, to quit bothering about the “wealth they created with their own applied human capital” part.
After all, the ruling classes never did have any more human capital than anyone else. So the only way to ensure they remained the ruling classes, was to find a way for their human-capital-challenged selves to obtain wealth by simple asymmetric privilege instead. Printing money is one such way. Taxation another. Asymmetric access to arms the third. Neither of which amount to anything more than simple, crass theft. Just lightly obfuscated, to confuse the less-than-bright among their underlings.
Helicopter Ben Bernanke said it a long time before Draghi.
What could go wrong?
Hold my beer and watch this!
“Putting money directly into consumer’s hands is a people QE, and ignoring government deficits on the theory they don’t matter is one of the tenants of MMT.”