Monday, November 25, 2013

Warren Mosler on the role of government and the relationship of currency creation, employment and taxation.

Lifted from the comments at Bill Mitchell's billy blog

Good post, as always!
Let me add that I like to say it this way.
The purpose of taxation is to create unemployment as defined: people looking for paid work.
Govt does this to provision itself.
It taxes in something no one has- the $A- which creates sellers of real goods and services (unemployment) presumably so the govt. can then hire them to provision itself.
So what’s the point of creating more unemployed than the govt wants to hire? Or, said another way, what’s the point of creating the unemployed govt wants to hire and then not hiring them?
There is no point, of course, and wouldn’t be under by anyone who understood how it works.
Furthermore, the $A is a simple ‘tax credit’ as its only ultimate use is to pay taxes.
That is, when the govt spend a $A, that dollar is either
1. used to pay taxes and is lost to the economy, or
2. is not immediately used to pay taxes and remains outstanding until it is used.
The govt. allows those unused tax credits to be held in three forms- as actual cash, as cash balances at the reserve bank, or as balances in securities accounts at the reserve bank called Treasury securities.
The total of the three is the national debt.
The national debt is simply the total tax credits spent but not yet used to pay taxes.
And so the question of ‘how is it going to be paid back’ is entirely inapplicable!
So why does the economy need a deficit (tax credits spent and not yet used to pay taxes)?
Exactly as Bill says- to accommodate the desire to net save.
bottom line- unemployment is always and necessarily the evidence that the govt hasn’t spent enough to cover the need to pay taxes and the desire to save.
same thing, other way around- If the tax unemploys more people than the govt hired, it should cut the tax or hire (directly or indirectly) the rest of the unemployed.
Best!
Warren
http://www.moslereconomics.com
twitter @wbmosler

50 comments:

JK said...

This is the only part I take issue with:

"bottom line- unemployment is always and necessarily the evidence that the govt hasn’t spent enough to cover the need to pay taxes and the desire to save."

What that seems to suggest is that the private sector is capable of maintaining 'full employment'. (here defined as truely FULL employment, not NAIRU or any other similar notion).

It seems to me that the private sector will never 100% hire everyone 'willing and able' to work. The lower unemployment gets, the more bargaining power Labor gets, which tends to induce Capitalists to increasingly look to mechanize their production as a response to increasing wages squeezing profit margins. Note: this is not a bad thing. It's a good thing. It spurs technological advancement. My point is that it doesn't seem accurate to say:

"unemployment is always and necessarily the evidence that the govt hasn’t spent enough to cover the need to pay taxes and the desire to save."

This suggests there is a proper role for an ELR/JG. A government budget run w.r.t. Functional Finance would likely result in continual low #s in the ELR/JG. Great!

Tom Hickey said...

Generally the way relatively full employment has been achieved in the past and in under-developed countries is through employment of a servant class and day laborers.

In the past, the poor were not taken care of through a welfare safety net, nor are they in under-developed countries today The choice is to work as servants for those better off, including the middle class, or hope to be hired for the day doing low-skill manual work.

This became less important in developed countries with the advent of labor-saving devices for housework, which made it less expensive than hiring servants unless servants worked for very little. Now that niche is filled by imported labor, often undocumented.

There are many places in the US that day labors hang out waiting for an offer for the day, that hopefully will turn out to provide a few days work if they work hard enough to be asked back.

The whole point of opposition to welfare is to force wages low enough for low-skilled workers to force them to take any job at any offer, e.g., becoming servants, yard workers, etc. not only for the rich but also the middle class.

This is social organization according to the strict father conservative model versus the nourishing mother liberal model. The idea is to punish people for being poor so they will work harder to avoid suffering the consequences of poverty, which in the strict father model is self-chosen.

Elizabeth O'Tool said...


There is no unemployment as defined in a non monetary system:


Full Employment AND Price Stability

“… one wants to explain the empirical fact that involuntary unemployment is only associated with money-using contractual economies. In other words, real economies that do not use money and money labor contracts to organize production (e.g., feudalism, slave economies, South Sea Islanders discovered by Margaret Meed, etc) may possess important nonlinearities and even an uncertain future — but there is never an important involuntary unemployment problem. Slaves are always fully employed as well as are serfs in feudalism…….Finally it should be noted that herds of animals, schools of fish, etc organize together to solve the economic problems of What? How? For Whom? Without using money, contracts or markets, these animals still face complex nonlinear problems in their search for food and interaction with other herds. Yet animals never suffer from involuntary unemployment!.

Professor Paul Davidson
University of Tennessee

(PKT Archives)

Roger Erickson said...

"So what’s the point of creating more unemployed than the govt wants to hire?"

Depends on who's asking. It's always an affinity question.

Answer? "Local Benefit for Control Frauds - i.e., parasites, NOT net public benefit."

Roger Erickson said...

Question left implied, but not explicitly asked: "So why does an electorate desire to net save?"

Answer, to further enable exploration, and improvement, of ... the quality of distributed decision-making.

Agile teams require some optimal function of global/local resiliency. That function is optimized as a 2-stage optimization task.

Resiliency of the group,
PLUS
Resiliency of the components.

Net resiliency is ultimately described as a polynomial, with length as long as the population PLUS all the characteristics of components/sub-groups/electorate.

Adequate liquidity for the electorate is a necessary but not sufficient step.

Adequate liquidity for all subsequent sub-levels is a cascading set of follow-on, necessary but not sufficient steps.

Adequately agile feedback interactions between all population components is the next task, after adequate liquidity for all.

Ultimate information liquidity encompasses both currency/feedback/activity degrees-of-freedom. That's what describes net Adaptive Rate of a population actively exploring the sum of it's group options (local plus global).

Neil Wilson said...

"This suggests there is a proper role for an ELR/JG. A government budget run w.r.t. Functional Finance would likely result in continual low #s in the ELR/JG. Great!"

That is the role for the JG. Not sure why anybody would think it is anything else. It's a buffer stock.

You tune the private economy as best you can without stoking inflation. Then you stop the private economy at that point and everybody else is on the JG.

The JG is at minimum during private economy boom periods and maximum during slumps - limiting the effect of both.

Ralph Musgrave said...

Re the suggestion by Paul Davidson that money causes unemployment (quoted by Elizabeth O’Tool above), I have doubts.

My hunch is that as economies become more complex, barter becomes impossible, so they have to use money. And unemployment rises. But unemployment results from the complexity, not from money I think.

To illustrate, if the US economy tried to abandon money and employ barter instead, the result would be complete chaos, including far more unemployment than exists at the moment.

Warren Mosler said...

the point of taxation is to create unemployment- sellers of real goods and services/labor

Roger Erickson said...

Or, to be blunt, Ralph, taxes impose motivation

motivation to do what?
liquidate real goods & services, & supply them to others (in your country, aka, on your team)

so that those receiving said goods are free to apply themselves to other, selected tasks (call it unemployment ... or idle rich, thinkers, innovators, inventors, researchers ... ?)

such as? the sky's the limit;
Natural Selection for cultures (or any entities that tax themselves)... is partly defined as what they select to do with their now-unemployed time (which is either wasted, or transferred to NEW CHALLENGES)

Roger Erickson said...

ps: note that taxation and employment/unemployment existed in community time banks, even before invention of physical currency tokens;
oldest large structures known are megalithic structures requiring significant diversion of affordable, leisure time

Roger Erickson said...

JK - of course the private sector is capable of maintaining 'full employment', by various means;

that doesn't mean that it's easy to do so

the private sector, after all, is the one that invents a collaborative system called a government;

and the private sector directs it's government to create and regulate a method for tallying and regulating the distribution of social credits & debits (that's called a currency system)

a public currency system is just the most pragmatic way (so far) for a private sector to collaboratively maintain adequate team capabilities (aka, adequate employment)

seems that all private sectors, even when collaborating ingeniously, take extreme risks with team survival (or else Romes wouldn't fall, periodically)_

often, despite their elaborate tallying/regulating methods, large teams simply lose track of the efficacy of their assessment techniques;
when expanding populations can no longer see their group function for their technical assessment forms, that's when "Rome" is more likely to fall off a cliff,

does that describe the blather we all call "Monetary Policy," or what? :)
form over function

It's a race to see which large public policy team wakes up in time, and smells survival function again. We may not be 1st this time, nor best positioned to leverage any spreading re-awakening, nor practiced enough to leverage any perspective regained.

We seem intent on wasting much of our options. Can't recover an Output Gap. The lost opportunities are gone forever.

Roger Erickson said...

Are people no longer tasked with old assignments really unemployed?

We pay coaches, advisors, teachers ... even mediators!

We even pretend to pay grandparents and the elder (pensions).

There's always a richer mix of social credits/debits/motivations going on than most people discuss.

How to use all available options to discover and reduce new Output Gaps is how social cultures adapt.

Otherwise, we'd all still be fully employed chipping flints and whittling projectile shafts.

Matt Franko said...

Roger,

imo people currently do not understand what their options are...

They lack some sort of cognitive ability to identify ALL options at the current time...

I think it should be our job to simply help the general population to obtain the knowledge of what their full set of options are at this point... WE know of a BIG option that they are currently missing. Have to get this over to them somehow... rsp,

Roger Erickson said...

Seems to me that there are 2 boundaries for what we call "unemployed" - and all the "underemployed" space in between.

Idle "rich" [savings rich or guaranteed-income rich] - motivated to explore options or not, they're the ones the public spends on (for WHATEVER reasons; innovation, corp welfare, even Innocent Fraud)

Those people who are newly taxed: they presumably MUST find indentured terms dictated by others in the public strategic spectrum, in order to pay tax burdens that exceed or threaten their available income/savings.

There's always a creative mix of situations in between those two definitions.

As has long been noted. A currency system is an information and feedback system. How productively a private sector population group uses it is inseparable from how an electorate selects it's policy staff (i.e., it's "government").

Dan Kervick said...

I don't understand what Warren means by:

"The total of the three is the national debt."

That seems like a confusing redefinition of the term "national debt".

F. Beard said...

"bottom line- unemployment is always and necessarily the evidence that the govt hasn’t spent enough to cover the need to pay taxes and the desire to save." Warren Mosler

Yes, I take issue with this statement too. What about when robots can do nearly ALL work?

BUT a BIG would simultaneously reduce the number who NEEDED to work and drive up aggregate demand (and employment) too.

And why not return to single worker households? And/or reduce the work week? And land reform to return the farms the banks stole? And the redistribution of the common stock of all large corporations?

A just money system(s) would have precluded almost all of the economic and social problems we face today.

F. Beard said...

I'll remind JG proponents that the Hebrews were kept busy and well-fed (and somewhat skilled?) as slaves in Egypt (building useless pyramids? wasting their of time?)

Yet, the Lord saw fit to give most of them (actually their children, since that generation was displeasing to the Lord) family farms in Canaan.

So then, why do some of you propose to perpetuate wage slavery? Rather than, as you are commanded, do justice?

Just one of MANY references to justice in the Bible:

Thus says the Lord, “Do justice and righteousness, and deliver the one who has been robbed from the power of his oppressor. Also do not mistreat or do violence to the stranger, the orphan, or the widow; and do not shed innocent blood in this place. Jeremiah 22:3

The banking cartel is the chief robber and oppressor today. Where then are your proposals to deliver from it?

Dan Kervick said...

Yes, full employment is not enough if it is not combined with a commitment to an egalitarian economy.

Charles Hayden said...

Dan K.,

we have other economic goals besides full employment and price stability.

Malmo's Ghost said...

"...BUT a BIG would simultaneously reduce the number who NEEDED to work and drive up aggregate demand (and employment) too.

And why not return to single worker households? And/or reduce the work week?..."

The conditions which led to capitalism have been eradicated. It's now time to abolish capitalism for a new way to prosper and enjoy life, which doesn't elevate Capital to God status:

25 hr work week max. Wage labor (slavery) abolished. A big BIG. Voluntary JG if that sets wind to your sails, for all the workaholics out there. Confiscatory taxation @ 95% for earnings beyond $300,000. No taxation for anyone making $100,000 or less. Corporations are no longer persons. The ethos of conform, consume and obey (in other words selling one's labor to survive and its antecedent Puritan work ethic)) will be abolished in favor of the ethos of leisure first and productivity, whatever that constitutes, second....Less will be more.

Matt Franko said...

Well Dan, this:

"The purpose of taxation is to create unemployment ..."

does not sound very egalitarian per se imo...

If you look at what Aristotle wrote about this system, he wrote that "nomisma is a voluntary convention"...

Based on their concept of 'nomos' back then which was 'law' or at least some sort of like 'legal convention' that his writing looked at as somewhat voluntary imo... or at least the large majority were on board with the 'nomos'...(I'm looking into this concept of 'nomos' and intend to do a post...)

I see this strife that develops with these libertarians with this 'framing' or whatever you want to call it...

Its like Warren's "9mm" or 'there is a guy at the door with a gun" thing and we lose the libertarians right there with that framing... libertarians dont like to be seen as 'forced' to do things in general imo...

So go back to the ancients they framed all of this as a 'voluntary convention' based on their 'nomos'.... which might be viewed as more egalitarian framing and doesnt make the libertarians lose it immediately...

rsp,

Tom Hickey said...

My hunch is that as economies become more complex, barter becomes impossible, so they have to use money. And unemployment rises. But unemployment results from the complexity, not from money I think.

I think that is essentially correct, Ralph. The need begins with division of labor and increasing complexity due to more abundance. At this point markets begin to develop and the early form of credit based on interpersonal trust is no longer as functional as it was, since markets based on commodity production with division of labor are essentially impersonal beyond a very local stage.

Trade using some sort of numeraire could have been the origination of the idea of a physical medium of exchange in addition to trust-based credit, since that seems to be quite ancient.

Whatever, militaries needed to be paid in something that was regarded as valuable, transportable and transferable. For example, "salary" comes from the Latin root sal for salt, and we still use the expression, "He isn't worth his salt."

Initially the money thing was not metal but some other token that was scarce enough to be able to be a store of value. It was only later that sovereign coinage was introduced at a higher degree of complexity. It was a developmental process that seems to have arisen in different locales, apparently not as a result of diffusion.

So it could be viewed as a natural progression in response to increasing social complexity, where what we now know as "money" was emergent and developed relative to need and the ability to innovate in response.

That response has become highly complex at this point with respect to money& banking and finance. In fact the financial crisis resulted in part from the degree of complexity and inability to properly appreciate its implications and consequences. Right now, shadow banking is as significant as currency creation and banking.

F. Beard said...

@Malmo's Ghost

I reckon we'd have near all those things EXCEPT that we've had a government-backed banking cartel one hundred years straight now and other explicit and implicit government privileges for banks the rest of our history.

Ethical money creation IS NOT a trivial concern and THIS generation has no excuse for dodging the issue or enabling (for only a bit longer?) the current corrupt system.

Matt Franko said...

F,

You're watching too many old Cecille B DeMille movies....

JK said...

Some thoughts:

I think that those who want to see significant social change are often walking a fine line between idealism and pragmaticism. While many so-called 'progressives' would like to see radical change to the system, we still have to deal with institutional frameworks that exist. The status quo is entrenched on many levels, e.g. the current power-elite that benefit so handsomely by maintaining it, but even simply in the psyche of the population. Humans are habit forming and often are not psychologically interested in radical change… they often want things to be just a little bit better. Baby steps.

Why is it important to appreciate this?

Because the more radical one's proposals become - radical here meaning different than the status quo (no positive or negative correlation) - the less likely one's proposals are to become reality. Not only will the current power-elite fight against more radical ideas more forcefully, but also the more radical the idea the less likely the idea will capture the minds of 'the people.' Major change is often scary, and in revolution there is no guarantee things will turn out better. Things can get worse.

We can idealize radical change, but change occurs in baby steps. You can't force a square peg into a round hole. It takes time for systems of organization and systems of thoughts to evolve; often more than one individual's lifetime.

F.Beard, do you really think 'first' should be overthrowing the entire financial system? Do you honestly think that's a best first course of action?

MMT is very pragmatic to me. It's an appropriate baby step. It's not too radical that it won't catch on, but it's also not too status quo that it won't lead to positive change.

While long term visiion is important, short term increments are as well.

IMO, although in the long run an ELR/JG - i.e. "work" - may become obsolete (maybe already should be obsolete)… in the meantime the idea definitely plays an important role in evolving human 'collective conciousness' to the point where people's minds are conditioned to believe that "making a living" should be a guanrateed Right of people. Also, the ELR/JG helps people understand that money is no object.

F.Beard, if MMT were to call for overthrowing the entire financial system it would quickly lead to all MMT ideas not being taken seriously… kinda like it seems most people here don't take your ideas seriously. Too radical too soon. You keep trying to push a square peg into a round hole.

Warren Mosler said...

What I've posted stands as points of logic for the various terms as defined.

And I can understand the difficulty of comprehension if logic isn't your thing.

But that's a different story...
;)

F. Beard said...

F.Beard, do you really think 'first' should be overthrowing the entire financial system? Do you honestly think that's a best first course of action? JK

Not overthrow, euthanize, as painlessly as possible.

Example: If further credit creation were temporarily banned* then a huge hole in the money supply would open up as existing credit was repaid with no new credit to replace it. That hole could be filled (rather, prevented) with new fiat metered out to the entire population until all deposits were 100% backed by reserves. Just who is going to legitimately OPPOSE that? Cheated debtors? Cheated non-debtors? The banks themselves since it would repair their balance sheets with new reserves? Steve Keen has suggested something similar with his "A Modern Debt Jubilee".

And after the metered fiat distribution then banks, after being made 100% private with NO government privileges, could leverage as much as they and their now 100% voluntary depositors dared.

*New 100% reserve lending would still be allowed and the new fiat would provide enough new reserves to prevent deflation.

Tom Hickey said...

Yes, full employment is not enough if it is not combined with a commitment to an egalitarian economy.

Right . Slavery and serfdom were "full-employment economies."

The question is how to avoid modern debt serfdom, as Michael Hudson has been beating on.

Malmo's Ghost said...

@JK

Money is no object? I'm not sure what you mean by that.

As for radical. Gay marriage was radical only a decade ago. Public opinion can shift on the dime if the time is right. To suggest altering the nature of work and compensation is too radical to initiate is simply wrong. The conditions are ripe for just that conversation and implementation. MMT does not have a lock on how we should live. In fact I find it very sterile at times. At base it's still a tool to manipulate human behavior. It doesn't take Marx to tell us that selling one's labor to live has been the alienating train wreck that it is. Very reasonable people have the right to lament that there can be a better way, which doesn't have to be associated with utopia.

I understand that we live in a complex world that can't be abandoned all at once. It's a process that will take time and patience. Even if MMT somehow wins the day, the conversation doesn't have to end there. There's more than one way to skin a cat when it comes to equitable living arrangements.

Tom Hickey said...

The conditions which led to capitalism have been eradicated. It's now time to abolish capitalism for a new way to prosper and enjoy life, which doesnt elevate Capital to God status:

Might have to get the world globalized under capitalism first before there is large scale transition to the next step, the nature of which is not yet clear. Solutions to emergent challenges are themselves emergent.

Tom Hickey said...

Let's take a simple example to illustrate Warren's point, one that is not too far from the historical facts.

The king wants to raise and army and the logistics to support it. In the past forced conscription and confiscation of the needed logistical resources have not been well received by the subjects. So the king issues money as tax credits and requires that a tax be paid, say a head tax. That creates the need to get the money and the money has value in exchange since other people want it because they would prefer to keep their heads. The money is used to hire soldiers and pay for provisions. This is only possible without constraining the economy if the surplus is great enough. Say it is. Then the kingdom is provisioned with an army, the populace is fully employed and there are markets based on the king's money as the medium of exchange. Everyone is happy, or at least happier than with conscription and confiscation, since no one likes a tax either.

Notice that the king doesn't need to tax or borrow to get what he will accept as a tax credit, since he dictates it.

Tom Hickey said...

Might have to get the world globalized under capitalism first before there is large scale transition to the next step, the nature of which is not yet clear. Solutions to emergent challenges are themselves emergent.

I should clarify that I don't think that is necessarily needs to be neoliberal capitalism. Social Democracy, Third Way, and other proposals for a mixed economy are less economically liberal forms of capitalism that neoliberalism. They could be a bridge, and already are in the sense that the world is not homogenous now.

F. Beard said...

Yes Tom, but what about when robots can do almost all work and 24 hours a day too? Then why wouldn't only a small number of employed be required?

That's just one reason why we need to focus on justice, not jobs, since the latter are rapidly being eliminated.

F. Beard said...

And I'll add that IF we are to have a huge population of permanently unemployed then they will need RESOURCES to keep them healthily occupied anyway.

So it comes back to justice ANYWAY.

JK said...

Malmo,

"Money is no object? I'm not sure what you mean by that."

I just meant it's not finite. There isn't some limited amount. The gov creates it with keystrokes. The ELR/JG helps instil that idea. So would a BIG; etc.

Btw, I wasn't saying that MMT is the end all be all to solve all our problems. I was suggesting that MMT seems very pragmatic to me. It's radical enough to cause positive change (gay marriage), but it's not too radical that most will dismiss the ideas (human-animal marriage).

The point of my comments directed at F.Beard is that what he's continaully calling for is too radical too soon IMO; I don't think society understands money well enough to support a radical change to the money system. Too scary. MMT ideas are appropriate increments of change right now. Not too radical, not too status quo. The ideas could definitely spread quickly.

F. Beard said...

The question is how to avoid modern debt serfdom, as Michael Hudson has been beating on. Tom Hickey

Common stock as private money requires no debt, much less usury, nor fractional reserves, nor government privileges such as a central bank and deposit insurance.

Also, let fiat ONLY be legal tender* for government debt and we'll have a nice balance between government and the private sector when it comes to symbolic purchasing power creation.

*But voluntarily useable for private debts too.

Malmo's Ghost said...

@JK

I agree with most of what you said above. I'm an incrementalist with a definite end goal in mind--the eventual eradication of capitalism as we know and practice it. I realize we won't get there soon, yet that doesn't negate the fact, to my thinking anyway, that an egalitarian world is impossible absent moving beyond the God of Capital. MMT might well be a necessary step along the way. Then again it might not be. I sure don't want to see MMT or a variation thereof used somehow by the plutocrats in a nefarious way, however. All MMT is to me is a means to a larger more just end for us all. Bottom line is we need far more change than acknowledging the usefulness of a monetary system. If 60 years of 50+ hour a week wage slavery is part of MMT's equation then you can count me out.

Tyler Healey said...

Is unemployment ever evidence that the govt hasn’t spent enough to cover the rich's desire to hoard?

F. Beard said...

Is unemployment ever evidence that the govt hasn’t spent enough to cover the rich's desire to hoard? Tyler

Sufficient government spending could disincentivize hoarding of fiat. But that would not necessarily increase employment except for a increasingly small percentage of potential workers as automation expands and improves.

What a disgrace! A society embarrassed by riches!

Ill-gotten gains do not profit, but righteousness delivers from death. Proverbs 10:2

Tyler Healey said...

I don't understand why a federal "debt" of nearly $20 trillion is not enough to achieve full employment.

F. Beard said...

I don't understand why a federal "debt" of nearly $20 trillion is not enough to achieve full employment. Tyler

Because the monetary sovereign is paying people a risk-free return, i.e. disguised welfare, often for the rich, by borrowing its own fiat - something it need NEVER do.

Welfare should be ONLY for those who need it - not for the banks and the rich. Our money system is fascist - government for the rich - instead of for the general welfare.

Tom Hickey said...

The "debt" is a stock (of $NFA). In the sectoral balance equation, the variables are flows.

JK said...

Tyler,

As Tom just hinted at… the stock of money doesn't really matter. Hell, the government could give me 500 trillion dollars and if I hide it in a hole in the ground and don't spend any of it then it's like it doesn't even exist.

Employment is a function of flows. Business is all about sales. More spending = more sales = more jobs. Cha-ching Cha-ching Cha-ching.

Roger Erickson said...

Well, there's expectations theory, JK.

Some people run risk management based on what they fear other's may be hiding in reserve, and can bring out at any moment.

God forbid those same people realize that every free electorate is hiding UNLIMITED amounts of fiat in some figurative hole.

Worse yet, what if that sinks in for NeoCons?

No wonder they want a police state that THEY run. If they can't find the fiat, then WE must be hiding it from them?

:( Oh.My.Freaking.Gods!

This could obviously, and easily, get FAR worse.

If we don't start PREPARING the next generation of youth to have bigger perspectives on expanding reality ... then we're toast. And our little democracy too.

It's not static wealth we need. Snails have that! It's dynamic perspective, and the Policy Agility which perspective brings. That's how to adaptively explore our infinite Policy Space, not just have it in theory.

Calgacus said...

I don't understand what Warren means by:

"The total of the three is the national debt."

That seems like a confusing redefinition of the term "national debt".


Dan, that's the standard MMT conception of "the national debt". It's the only reasonable, non-arbitrary definition. Any other definition is confusing and misleading.

Roger Erickson said...

All public finance regimes boil down to semantics.

National "debt" is simply the sum of all tax credits already extended, but not yet clawed back as taxes.

Elegant for Warren to see through that, and call it what it is. A closed spreadsheet system.

Fiat currency denominates something selectively distributed, & not yet selectively "called".

What's distributed are credit entries for participation in Public, and those "initiative tokens" are loaned from an electorate, to itself.

Personally as well, we're all indebted to our own selves too. We just don't bother to even numerically track the self-loans and self-repayments.

Why, just now, I loaned myself enough initiative to go get another beer from the 'fridge. Don't know how I'll ever pay down my debt-to-self. :)

Roger Erickson said...

oops, meant "distributed for participation in Public Purpose"

Tom Hickey said...

"National debt" = aggregate non-government saving of $NFA.

It's why Warren says that the monetary base/HPM is reserves (rb and vault cash), cash in circulation and tsys held by non-government)

Actually should be reserves held by banks less rb banks have borrowed from the cb, since tne rb borrowed from the cb are not government liabilities owned by non-government?

Calgacus said...

Actually should be reserves held by banks less rb banks have borrowed from the cb, since the rb borrowed from the cb are not government liabilities owned by non-government?

No, they are g ls owned by the nong, just like any other reserves. They're just "offset" by a nong l owned by the g, the loan from the fed, which is like taxes not yet due.

Tom Hickey said...

Thanks for clearing that up.