https://www.philadelphiafed.org/-/media/publications/economic-education/ben-franklin-and-paper-money-economy.pdf
For example, take our dimwit reporters ... please! In an otherwise incredibly useful article, this fateful comment was still found lurking.
"How would government pay for prolonged 'deficits?' It would get the money by selling securities to the central bank in exchange for cash."
BMHOTK! Whatever! [That dull throbbing you hear is the sound of logicians pounding their heads on tables in frustration.]
If we "get" money by selling securities, how do we pay off the securities? Let me guess. We "get" securities back by selling money? So why bother?
What do YOU do when you have a prolonged deficit in fiat? Nothing? :(
(Does anyone bother speaking intelligible language anymore, or only sophism?)
As an alternative to "buying" fiat, a public could just track & monitor currency issuance, as north american colonies did, starting from ~1680 onwards. If not for our revolution, we might still be using someone else's currency, and in the same position as Greece today.
Today, issuing & tracking our own currency supply could be done with cell phone apps. As MRW notes, we don't need a semi-independent, supposedly private Central Bank to pretend to independently "own" or even administer our currency supply. We only need a Central Bank by any other name, without all the mystical baggage. As has been noted in past MMT discussions, all CB functions could easily be run out of a basement room in the Treasury Dept, maybe one called the "Ministry of Money."
Since we let Central Bankers simply mark up bank accounts by striking a key on a keypad, then we can also just get rid of our Central Bankers, and instead automate the process of denominating transactions between ALL debtors and creditors! Fiat by fiat. Wotta concept! Sovereign currency could be just another Automatic Stabilizer (instead of an Automatic Destabilizer).
That way we could bail out regulators instead of bailing out banksters. :( Ya think?
Wake me if this electorate ever wakes up (to logic-101).
However, until then, it's full head of steam towards convenient wall.
As an alternative to "buying" fiat, a public could just track & monitor currency issuance, as north american colonies did, starting from ~1680 onwards. If not for our revolution, we might still be using someone else's currency, and in the same position as Greece today.
Today, issuing & tracking our own currency supply could be done with cell phone apps. As MRW notes, we don't need a semi-independent, supposedly private Central Bank to pretend to independently "own" or even administer our currency supply. We only need a Central Bank by any other name, without all the mystical baggage. As has been noted in past MMT discussions, all CB functions could easily be run out of a basement room in the Treasury Dept, maybe one called the "Ministry of Money."
Since we let Central Bankers simply mark up bank accounts by striking a key on a keypad, then we can also just get rid of our Central Bankers, and instead automate the process of denominating transactions between ALL debtors and creditors! Fiat by fiat. Wotta concept! Sovereign currency could be just another Automatic Stabilizer (instead of an Automatic Destabilizer).
That way we could bail out regulators instead of bailing out banksters. :( Ya think?
Wake me if this electorate ever wakes up (to logic-101).
However, until then, it's full head of steam towards convenient wall.
"Kelton sighs but agrees when I point out that this essentially means printing money."
ReplyDeleteDid she agree and if so, why did (or does) she agree with this statement? (And I've heard her acquiesce on this before.)
I would say to confront this head on with Article I, sections 8-10 of the US Constitution that reserves the power to issue the national currency to the federal government. The correction should therefore be that the federal government of the United states is the sole issuer of the currency. The US government issues the dollar for use by those who are users of the dollar. This means that the US government is the sole entity that can print notes and securities and mint coins, as well as instruct its bank to credit bank accounts on its behalf. That defines the dollar zone.
ReplyDeleteThen ask, got any problem understanding that? If you do, where do you think dollars come from?
Oh, and if the answer is that the Fed is a private institution, send them to the Federal Reserve Act.
ReplyDeleteWhether QE\OMF is "printing money" or not is 100% context dependent. If you dont include at least some Govt securities accounts (should be part of M2) in your definition of money, then QE is printing money. If a 12 mo-CD at Chase where they promise to deliver Govt currency which Chase cant create is considered "money", then how on Earth can a 12-mo T-note not be considered "money" even though it is A) transferable and B) a promise from the issuer of Govt currency to deliver Govt currency????? Its fucking insanity!!!!
ReplyDeleteKelton is referring to QE, which can either just increase the monetary base (if the central bank is buying bonds held by the commercial banks) or both the monetary base and bank deposits, aka "money" (if the CB is buying securities held by the non bank private sector).
ReplyDeleteA great interview and a great article. If the U.S. media followed this example given by a Canadian colleague perhaps MMT would have a chance to break out of its relative isolation.
" If the surplus held by the private economy is spent on say, useful infrastructure or measures to reduce inequality, then it could be considered worthwhile."
ReplyDelete???????
How can the govt deficit (non-govt surplus) be spent it is savings????
Govt spends FIRST and THEN collects taxes.... it doesnt spend "the deficit"... it spends what it spends... the deficit is an ex post accounting of savings of previous govt spending...
Issuing & tracking our own currency supply could now be done with cell phone apps.
ReplyDeleteOh sure, that would work. /sarc. The Chinese, Ukrainian, and Russian kids would have that cracked in two nanoseconds.
We don't need a Central Bank to pretend to independently "own" or even administer our currency supply
So we wouldn't need escrow accounts? Who provides the check and balance?
Are you aware of the panic and destruction to ordinary lives that existed in 1893 (the Panic of 1893 became global) as a result of what the lack of a central bank was doing to this country? Great Britain, Germany, France, and Canada, all had central banks by that time and none of them were experiencing panics, or runs on the bank. Unless, of course, you believe the fiction that it was the Panic of 1907 that created the Federal Reserve, which came from one sentence in Paul Samuelson's 1947 Principles of Economics that subsequent writers about the Federal Reserve never bothered to verify. Because Paul Samuelson pulled it out of his ass, and all the 'Federal Reserve is a private institution' proponents--as derelict in their research as Samuelson was--subsumed the idea without spending one minute in a research library.
subsumed the idea without spending one minute in a research library.
ReplyDeleteWhich I did, and I do.
more . . .
I'm not as smart about money stuff as all the other people here, and probably not as smart as you are, Roger Erickson, but there is one thing I do: I gumshoe. I search out the source documents. I go through reams of shit no one would bother with, and I order copies from the Library of Congress and I call and email the Federal Reserve, and the US Treasury. I do it because I am too dumb to know the difference, and I don't enjoy fooling myself. I am also happy to report I could shut down G Edward Griffin and his "The Creature from Jekyll Island"(2010) in a public debate (provided I could bring my papers) in five minutes.
The best motherf**king thing that ever happened to us as a country was that we got a central bank. Our problem is that we don't have a Congress that understands what to do with it--especially over time--and how to instruct it, since constitutionally only Congress has the legal power to do something about it. Congress has abdicated its responsibilities, the hoi polloi don't know that, and we elect dummkopfs that would be better suited as greeters at Walmart (my apologies to the people at Walmart).
That's your problem. Not the lack of some cellphone app.
M,
ReplyDeleteCan't agree more we have reeeeeeaaaalllly bad people in key positions right now.... completely unqualified and incompetent. .. rsp
Completely agreed, MRW. I meant & should have said "semi-independent, supposedly private" Central Bank. I'll change the text per your commentary. Thanks.
ReplyDeleteMy point still holds that Central Banking can be made into a fully automated, Automatic Stabilizer.
Only quibble I'd have w your statements is that we can make any IT application secure .. WHEN WE WANT TO.
Roger,
ReplyDeleteOnly quibble I'd have w your statements is that we can make any IT application secure .. WHEN WE WANT TO.
We can't. Not now. You're now entering my area of expertise. I worked as a consultant for Bell Labs for over 10 years. I trained NSA 31 years ago to tap into the AT&T trunk lines to scarf up every bit of data emitted by US citizens. [I provided plausible deniability.] What Alex Klein reported in 2006/2007 (San Francisco AT&T offices) was the tip of the iceberg. Forget the "only metadata bullshit'. Every phone and email conversation was originally preserved under NSA's building and parking lot five to seven stories deep until the Utah holographic-drive installation was built (reason why they can say it's a 100-year installation) .
NSA had code and field access to something that was initially called the PLN internally at AT&T, the Private Line Network. Only 100 scientists in the country knew about this system, and I taught the new recruits. NSA's machines were parked beside AT&T trunk nodes at the 10 sites operating then, San Francisco being only one of them. They siphon off what AT&T is handling. I understand there are now 20.
The only difference now is that they use an Israeli product called NARUS to do the handoff. I believe Boeing has purchased NARUS to protect Israeli involvement from American wrath.
Until actual people at NSA are brought up on criminal charges this will not end. So you can forget the idea that these apps can be secured.
Yes, MRW, but that doesn't make existing Fed computer terminals any more secure than cell phone apps, or cloud computing.
ReplyDeleteI don't see how a push to automate and expose "fiat" currency operations could make things any worse than today. White collar crime still dwarfs electronic crime. So there's always a need to maintain data integrity in all data archives while simultaneously regulating the behavior of all people managing said data records.
Personally, I see a need to speed things up, by sweeping away Fed bureaucracy, and re-investing in much, recently discarded, policy regulation. There's no place to hide, except in plain sight, while relying on agility for survival.
Roger,
ReplyDelete"Yes, MRW, but that doesn't make existing Fed computer terminals any more secure than cell phone apps, or cloud computing."
Those are three different points of entry, and consequently three different security issues. Apple 6 apps are not permitted currently by Apple to handoff to third-parties (e.g.: medical/fitness apps), but they are by Android. I don't know if vice versa applies. Critical Fed terminals are on their own trunk system. Cloud computing depends on the end-to-end encryption and encryption-level used, and that's decided by private companies, not the government, so we can't get the right to verify.
"Personally, I see a need to speed things up, by sweeping away Fed bureaucracy, and re-investing in much, recently discarded, policy regulation."
Having Congress do actual fiscal policy would be a start. They haven't done it for 30 years.
"I don't see how a push to automate and expose "fiat" currency operations could make things any worse than today."
From one perspective, it already is. It's already automated and digitized. The PayPal boys figured that out 17 years ago.
Don't forget that 100 million people in America don't have broadband access. http://www.pbs.org/newshour/bb/media-jan-june13-broadband_03-22/. And we don't have free high-speed citywide information highways (like Japan, Korea, and a few trial US cities), which I perceive as a criminal act since all Americans own the airwaves that broadband gives them access to. So digital apps only benefit people above a certain wage class, and who can afford data packages. That's assuming they own smartphones, which is currently around 65% of mobile phone users.
But that leaves the issue of who has the right to issue USD fiat. I don't want my neighbor doing it other than creating credit money, which he alone takes on as a debt.
Roger,
ReplyDeleteOne more thing. "As has been noted in past MMT discussions, all CB functions could easily be run out of a basement room in the Treasury Dept, maybe one called the "Ministry of Money.""
That's only to imply how simple the whole thing is. But that has nothing to do with the infrastructure. There was a reason they created 12 district Federal Reserve banks. Geography. Before they were created, everything was operating out of the NY banking system, and it was the NY bankers who could see when the farmers and ranchers needed cash to bring the harvest in or get the cows to Chicago. That's when they raised the interest rates to usury levels. They did that same thing to all the sectors they could control.
Furthermore, back then there was no road system, and the beginning and end points for railroads were horses. So if there was a run on the bank in Durango, Co, the banker didn't have the time to get physical cash from the financial centers before his bank went down in flames. The only reason why they made the individual Federal Reserve banks "private" entities owned by the banks in the district was because the public was absolutely terrified of socialism (the Panic of 1893 created the Russian Revolution), and they perceived the government owning the district banks as socialism. So the federal government came up with an anemic stock scheme that masqueraded as private ownership with no teeth and no voting power, then slapped the Federal Reserve Board of Governors 100% over the district banks as the federal government ruling body.
Our central bank runs the nation's payment system. And as the reserve currency, it runs the world's as well in USD. The US postal system may seem to operate as a separate entity, but it is 100% a US federal government agency. So is the Federal Reserve system. US physical dollars are not created by the Bureau of Printing and Engraving for a district Federal Reserve bank without 100% of the request backed up by collateral that the "Federal Reserve Agent" (one per district) guarantees and reports to at the end of every day to the US Bureau of Printing and Engraving, which is a department of the US Treasury.
Yes, agreed to all, MRW ... and that's all necessary but not sufficient. By the way, you skipped over how long it took to make the Fed more democratic, instead of dominated by the NY Fed (that democratization step was pushed through by Marriner Eccles, with FDR support, in the 1930s).
ReplyDeleteThe point still remains that we now are long past the need to make the Fed even more democratic, more transparent, and far more agile. I still think it could today be largely automated.
Speaking of Fed Apps ... this one's a step in the right direction.
ReplyDeleteFirst Index Funds, now a Wealth Mgt App :(
http://www.businessinsider.com/investment-tips-for-the-99-2012-3
Can FedAPP be far off?
Ready made marketing slogan. Fed up? Get FedAPP :)
Well, Roger, the NY Fed didn't dominate until Volker gave up the DC district bank for the NYC Fed as the headquarters in the late 70s, right? Until then the HQ was always DC.
ReplyDeleteNo, prior to Marriner Eccles, 1936, there was no FOMC. It's my understanding that interest rate decisions came entirely from the NY Fed, from 1913 until Eccles, (1936, or slightly before).
ReplyDeleteThere are some interesting references to those Eccles-led changes, in the Marriner Eccles article referenced here
http://mikenormaneconomics.blogspot.com/2015/04/if-all-america-only-knew-what-some.html
MRW,
ReplyDeleteThis one's for you.
Steve Randy Waldman @interfluidity 22m22 minutes ago
“I actually do feel safer around a self-driving car than most other California drivers.” faint praise, via @ATabarrok http://marginalrevolution.com/marginalrevolution/2015/05/google-cars-drives-like-your-grandma.html …
:) LOL! Maybe we'd also feel better with self-loaning (fiat) banking apps? :)