An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Sunday, August 5, 2012
Izabella Kaminska — The Fed’s 1.6 trillion ‘somethings’
Izabella and Chris Cook explain tax credits. Old but goodie.
"The key point is that the tax credits are not the loan: they are the things that are loaned, or the object of the loans."
The loan is an accounting entry, a bank asset and the borrower's liability. The deposit it creates is also an accounting entry, the bank's liability and the borrower's asset.
The deposit is the bank's promise to provide the borrower with tax credits on demand, either cash at the window, or the rb to clear checks and electronic withdrawals. The loan represents the borrower's promise to return those tax credits, either as cash or rb in the form of a cleared check or electronic transfer.
The point is that the accounting entries are different from the tax credits. When a deposit is credited to a customer account nothing else happens. The bank does not move cash from its vault to a segregated customer account, and customers have no access to rb other than through the bank as intermediary.
right Tom all of this is abstract. ie not "gold standard thinking".
So even when those of our own say something like "taxes destroy money" I dont think that is putting it properly it may be misleading to someone who doesnt have high ability for abstract thought...
Not sure I follow this regarding bank loans...
ReplyDelete"The key point is that the tax credits are not the loan: they are the things that are loaned, or the object of the loans."
"The key point is that the tax credits are not the loan: they are the things that are loaned, or the object of the loans."
ReplyDeleteThe loan is an accounting entry, a bank asset and the borrower's liability. The deposit it creates is also an accounting entry, the bank's liability and the borrower's asset.
The deposit is the bank's promise to provide the borrower with tax credits on demand, either cash at the window, or the rb to clear checks and electronic withdrawals. The loan represents the borrower's promise to return those tax credits, either as cash or rb in the form of a cleared check or electronic transfer.
The point is that the accounting entries are different from the tax credits. When a deposit is credited to a customer account nothing else happens. The bank does not move cash from its vault to a segregated customer account, and customers have no access to rb other than through the bank as intermediary.
right Tom all of this is abstract. ie not "gold standard thinking".
ReplyDeleteSo even when those of our own say something like "taxes destroy money" I dont think that is putting it properly it may be misleading to someone who doesnt have high ability for abstract thought...
rsp,