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.
Josh Ryan-Collins — Public budgeting for public purpose
Stephanie Kelton brings MMT to Great Britain.
UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM Public budgeting for public purpose
This article demonstrates what I have referred to as “residual false beliefs.”
In the human mind there is no hard distinction between conscious and subconscious awareness. Instead, the human mind is like a spectrum in which one color fades into another color, which fades into another color. The conscious mind fades into the subconscious, which fades into deeper levels of the subconscious, and so on, deeper and deeper all the way down to your True Self, which is pure consciousness, and is in fact God.
Therefore you might disprove a person’s false belief at his conscious level (e.g. “money is physical and limited”), but his subconscious mind will continue to hold the false belief, and it will continue to make the false belief pop up in his conscious mind in myriad forms.
For example, this article promotes MMT, yet it is filled with false residual beliefs.
False residual belief: “Public borrowing is the difference between what the government spends and its income.”
No. “Public borrowing” is the amount of money that various parties have deposited in Bank of England savings accounts. Moreover the UK government creates its spending money out of thin air by crediting bank accounts, and therefore has no need for “income,” just as a sports scoreboard has no need for a “points income.”
False residual belief: “ “UK government spending can actually enable growth at a faster rate than increases in borrowing, meaning that over time the debt to GDP ratio can fall even if the spending is funded by borrowing.”
No. UK government spending is not funded by borrowing. The UK government creates its spending money. Hence the public debt-to-GDP ratio is meaningless for the UK. However the private debt-to-GDP ratio is crucial, because an economy can be crippled by high mortgage payments, high rents, student loan debt, “payday loan” debt, and so on.
False residual belief: “The Prime Minister has informed us that ‘there is no magic money tree.’ When money was backed by gold, there was some truth to this argument.”
No. There was never any truth to this argument. The “gold standard” was always a lie. It was a gimmick that the UK government abandoned whenever the government needed to create mass amounts of money for wars and so on.
The point here is that the author wants to believe Stephanie Kelton’s assertion that U.K. government spending is not like private household spending. However the author’s false residual subconscious beliefs keep popping up, such that the article is confusing and sometimes contradictory.
What I’m saying is that money issues are important to us all, and economics writers need to be more careful in their discourse and their thinking.
You might object that, “At least the author is promoting MMT, rather than lies.”
True, but I read the article twice, and it struck me as unnecessarily timid and complex. Let’s keep things clear and simple.
Here’s an example of fuzzy thinking…
The author says this: “The state asserts its monopoly power over the right to issue sterling by deeming it ‘legal tender’ and putting you in prison if you attempt to forge the currency.”
Correct. The UK pound sterling is backed by government laws, which may or may not include taxation. What gives value to money is not taxes, but laws (and social convention).
Then the author says this: “Why do we use the pound sterling? Ultimately, it is because of the state has determined that we must pay our taxes using these particular tokens.”
No. That’s a false residual belief popping up again, in this case the false mantra that “taxes drive money.”
What “drives money” is human activity governed by laws that may or may not include taxation.
But I guess it is much simpler than that: those UCL IIPP Blog guys simply got it wrong. They do not know much about finance, economics or MMT, but decided to write a blog post anyway. It is as simple as that. They liked Stephanie Kelton and her proposals, but did not quite get it.
"Public borrowing is the difference between what the government spends and its income."
The wrong thing with this sentence is that the difference between what the government spends and its income can be covered with money issuance, something that the blog authors don't seem to understand.
You are saying more or less what I am saying, except for some technicalities. “Public borrowing is the amount of money that various parties have deposited in Bank of England savings accounts". Well, it depends on what you and public managers define as "borrowing". Usually bonds are considered "borrowing", and bank reserves are not. Hence, you could not claim that public borrowing is the amount that people have in Bank of England accounts. What definition for the word "borrowing" is the most useful for public management? I don't know.
"Correct. The UK pound sterling is backed by government laws, which may or may not include taxation. What gives value to money is not taxes, but laws (and social convention)".
I don't agree. What laws are you talking aobut? Give me an example.
If the UK government eliminated all taxes (and fee and fines), its currency would lose value to zero in a matter of weeks. All other laws and social conventions would not change that. They would, at best, delay the process.
They do not know much about finance, economics or MMT, but decided to write a blog post anyway. They liked Stephanie Kelton and her proposals, but did not quite get it.
Correct. The authors liked what Kelton said, but they remain encumbered by their false beliefs.
“Public borrowing is the amount of money that various parties have deposited in Bank of England savings accounts.’ Well, it depends on what you and public managers define as ‘borrowing.’ Usually bonds are considered ‘borrowing,’ and bank reserves are not. Hence, you could not claim that public borrowing is the amount that people have in Bank of England accounts. What definition for the word ‘borrowing’ is the most useful for public management? I don't know.”
Let’s be crystal clear about this. When you deposit money in a regular bank, you lend your money to the bank. The bank is in debt to you for the amount of your deposit. If you purchase a Certificate of Deposit (CD) then you leave your money with the bank for an agreed-to amount of time in return for an agreed-to rate of interest from the bank. All banks are in debt to their depositors. During the term of the CD, you cannot spend your money. Hence your money becomes reserves for the bank.
The central bank is exactly the same, whether we speak of the Fed or the Bank of England. At the central bank, a Certificate of Deposit is called a Treasury security (or a “gilt” in the UK). You deposit your money in a central bank savings account (that is, you lend your money to the central bank) for an agreed-to amount of time in return for an agreed-to rate of interest from the bank. During the term of the Treasury security (or the “gilt” in the UK), you cannot spend your money. Hence your money becomes reserves for the central bank.
The central bank, like regular banks, is in debt to its depositors. This central bank’s debt to its depositors is called the “national debt.”
None of this has anything to do with the central GOVERNMENT’S ability to create money out of thin air and spend it into the economy.
"I don't agree. What laws are you talking about? Give me an example."
I refer, for instance, to federal laws that say the U.S. dollar or the U.K. pound sterling is legal tender for all debts public and private. For example, Section 5103 of title 31, United States Code says…
“United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.”
This does not ban people from using other forms of currency. It simply defines what a “dollar” is in a contract or obligation that is denominated in dollars. You could make a contract denominated in Bitcoin or euros if you want to.
Therefore I claim that the “taxes drive money” mantra is false and misleading. What “drives money” is human activity governed by laws that may or may not include tax laws.
“If the UK government eliminated all taxes (and fee and fines), its currency would lose value to zero in a matter of weeks. All other laws and social conventions would not change that. They would, at best, delay the process.”
What “drives” money is not taxes or anything else outside the human mind. We drive money by living in a consensus reality. A dollar has value because everyone agrees that it does. The U.K. has been using pounds sterling by social agreement for 1,222 years. Do you think this agreement would end if the U.K. government lowered taxes to zero, while keeping currency laws in place?
If so, then this is your false residual beliefs kicking in. You heard someone say that “taxes drive money,” and you imprinted this on your mind.
Since the imprint is subconscious, it distorts your conscious intellect.
Human activity comes first. Laws and social agreements come second. Taxes come third. This is what "drives money."
It’s an interesting question: - what ‘drives’ the Queen of England to be queen? And her subjects to be subservient? If everyone woke up tomorrow and the very idea of royalty had been washed from mind(s) – then who would she be? Konrad says her ghost would have to be washed from the subconscious too – like an echo chamber :-)! Who would pay her bills! The look on her face would be like the look on the minister’s faces of the Howard govt. (Aus) after they lost the election. Who am I? Especially if queen was washed from her mind too.
No wonder Lewis Carroll wrote ‘Alice’.
Curiouser and curiouser!” Cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English).
"I refer, for instance, to federal laws that say the U.S. dollar or the U.K. pound sterling is legal tender for all debts public and private."
First of all, there are a lot of countries with no legal tender laws in place, and they still have their own local currency, because taxes are what drive money, not legal tender laws.
Second, the legal tender laws in practice are non binding and non enforceable. If two people want to denominate and exchange things (and contracts) in a foreign currency or in anything else but the local currency, they will, and the government usually does not chose to interfere - as history has shown us. Also, it would be extremely costly to interfer. It is not easy to monitor and control all transactions of a economy. There are a few judicial cases where one party demands to the other to be paid in the local currency instead of the currency agreed in the contract, but they represent at best a very tiny (and neglectable) amount of transactions in the economy.
Third, legal tender laws do not stipulate that a dollar is worth the same as 1 kg of corn or anything like that. Legal tender laws do not control the value of the currency in any meaningful way.
Legal tender laws do not drive the value of currency.
Tradition and customs may give some stability for the value of the currency for some time, as history has also shown us (when some countries eliminated their currencies but some people still used it for some time), but just for some time.
Of course, there could be a lot of laws or traditions driving somehow the value of currency. But, today, in modern monetary economies like US or Japan or UK, taxes are the kind of laws and social agreements that drive currency.
I do not dispute the fact that in other institucional arrangements there could be another kinds of law driving the currency, but that is simply not the case in modern monetary countries.
"You heard someone say that “taxes drive money,” and you imprinted this on your mind."
I don't know what you mean by that. I read a lot of MMT material, compared it with real world evidence, and arrived at the conclusion that taxes indeed do drive money. I call it learning, but if you call it "imprinting", then I am fine with it.
"Do you think this agreement would end if the U.K. government lowered taxes to zero, while keeping currency laws in place?"
Yes, I do. The currency would disappear.
About the "borrowing" thing, I will write a separate answer to that... this one is big enough
"The central bank, like regular banks, is in debt to its depositors."
Yes, I do agree that bank reserves, notes and coins in circulation, and government bonds are all public liabilities (or public debt, if you wish). I'm not disputing that.
However, wording is important. For me, a loan is a special kind of liability (debt). One of its specific characteristics is that it is interesting bearing, while other kinds of debt are not. Hence, with that definition in mind, government bonds are a kind of loan, while notes and coins are not.
“Public borrowing”, in the definition of many economists, is about loans. When someone claims that the government borrows, it also means that it pays interest. Issuing notes and coins is not “borrowing”, although it is debt issuance nonetheless.
Of course, all that discussion is dependent on the definition of the words “debt”, “loan”, and “borrowing”. And such discussion does not change the fact that bank reserves, notes and coins in circulation, and government bonds are all public liabilities.
"It’s an interesting question: - what ‘drives’ the Queen of England to be queen? And her subjects to be subservient? If everyone woke up tomorrow and the very idea of royalty had been washed from mind(s) – then who would she be"
Well, isn't it too philosophical? I mean, what would happen if some aliens got here on earth and brainwashed everyone, making everybody forget everything? We all would be like just born babies and probably would die of hunger... so what?
I guess we should get a little more down-to-earth to have a meaningful discussion, I don't know.
The Monarch of England was the one who successfully could lay claim to the monopoly of the legitimate use of physical violence within England territory, in my mind.
Maybe such claim could be achieved through war and violence, maybe through diplomacy and alliances... history is there to tell us that it is a complex matter. But mass delusion doesn't seem to be a very productive way of approaching the matter...
“First of all, there are a lot of countries with no legal tender laws in place, and they still have their own local currency, because taxes are what drive money, not legal tender laws.”
Wrong. Humans make laws and currencies, and humans unmake them. What “drives” money is human activity and human agreement.
As I said, you heard the false slogan that “taxes drive money,” and you chose to imprint that false slogan on your mind. In doing so, you created a mental box that you desperately try to justify by repeating the slogan over and and over.
If taxes fell to zero, everyone would still want and use dollars. To claim that the “currency would disappear” like smoke in the wind is silly.
That’s okay. Life is a process of spinning ourselves into cocoons, and staying for a while in our cocoons (sometimes a long while) until we eventually emerge with new insight. Then we repeat the process. Enjoy your cocoon.
Regarding money as debt, I have discussed this at length in previous comments to other blog posts. All money is debt, but not all debts involve loans.
If you could explain better your claims and provide some evidence, I would be able to assess them. And then I would be able to exit the supposed "cocoon".
But if instead you prefer to profess some unecessary allegories and metaphors, nothing will change.
Hi Andre. Yes, of course at extremis anything becomes nonsensical: - it was Konrad’s “residual subconscious beliefs” which sparked the comment.
Just playing with the fanciful imagination a little to say whatever is in the mind, generally, has limited reality. I didn’t want to say ‘mass delusion’ but that would be a good platform for discussion. For example the physicists all look at each other nervously and awed, saying the material world is an illusion (something that pretends to be one thing and is in reality another) – disappearing as it does, over an ‘energy horizon’. Out of the mists of that horizon Life, Consciousness and Intelligence appear, in a form – how far back would you say the pattern for the ‘Queen of England’ goes?? Doesn’t mean you won’t have to pay your and her electricity bill, up until the point people change their minds. Mind is another good subject for discussion, since we all have one and use it. Look how it takes people out into the desert and dumps them there (another way of saying war begins in the minds of men)!
I have been crystal clear in my explanations. The reason why nothing will change in your mind is that, for the time being, you choose to cling to false beliefs. For you to mature beyond your false beliefs, you must choose to do so. No one can force you to choose. You will emerge from your current mental box when you are ready. Then you will repeat the process on the next level.
Deep down you know that I am correct, but your desire to awaken is in conflict with your desire to remain asleep in your current mental box, which is composed of false beliefs.
That's okay. We all go through this same conflict at various levels, and we will continue to do so. It's part of life. It's part of the evolutionary process.
Konrad, if I am understanding it right, you believe yourself to be more evolved, a superior man, the awaken, the mature, the one who claims to know some sort of superior truth. But I cannot see how.
You claim that I read a "false slogan that taxes drive money".
However, I claim that you read a false slogan that "legal tender laws drive money".
What is the difference between my claim and your claim?
I answer: my claim is supported by real evidence that legal tender laws are meaningless and do not affect society or economy in any meaningful way. I can show you a lot of research supporting it. Or even better: you can search such material yourself, if you chose to emerge from your current mental box.
In the end, it is real world evidence that counts, and not your opinion or my opinion.
If I got it right, you are unable to explain your claims in detail, and show any evidence that support your claims, and why and how legal tender laws drive money (or other laws, which you did not specify). If you cannot explain or give some evidence, as weak as they may be, then you are not so superior as you think you are.
Short lesson in epistemology, which is the branch of knowledge that studies knowledge (versus opinion, belief, etc.)
This inquiry began in earnest in the West with Plato's Dialogues, which form the basis for the Platonic dialectic.
A key question is what distinguishes knowledge from belief, opinion, imagination, supposition, assumption, etc.
The general answer is that knowledge is justified as being true, while the others are only assumed.
Justification implies decision criteria for judgment, since truth is a matter of discrimination and judgment, which is a function of intellect as the faculty of judgment.
Several criteria are proposed and some generally accepted while others not.
1. Evidence based on empirical data that are publicly available for verification.
2. Sound reasoning based on valid inference from premises known to be true.
3. Authority.
4. Analogy.
5. The fifth is what might be called "principles," "causes," and "reasons."
The first two are generally accepted and the second two disputed. Not that are aren't issues involving the first two.
These are the most controversial and there is little agreement on them. The different views are part of the foundation of different schools of thought.
So basically, the positivist solution that places all emphasis on #1 (sense observation) and # 2 (sound reasoning from premises known to be true based on #1) is generally accepted. But true positivists deny or marginalize the other criteria and now all are willing to do this.
So there is still fundamental disagreement over the foundations of epistemology.
Add to this the relativism of worldviews and there is wide room for controversy over "truth."
The skeptical view is that there is no established truth.
There are various forms of skepticism.
"Science" traditionally means true knowledge. But modern science is foundationally skeptical because scientific knowledge is tentative wrt future discovery.
Tom, that is finally some interesting/useful philosophy.
I would say that both 1 and 2 emanates from empirical evidence. A claim is true if it is supported by real world evidence or by logical inferences totally derived from other claims already supported by real world evidence.
I also would like to add that we will never be able to know if a claim/hypothesis is 100% true, even if there is plenty of evidence supporting it. That is how life goes. For some time, some people thought that Newton, with his physics theories, had discovered the absolute truth, the equations made by god himself or something like that. But then new theories emerged questioning the theory, like Einstein's Relativity. That is life.
However, it is unwise, unscientific, and unproductive when someone is arrogant and claims that something is true or false without any kind of even feeble evidence, based solely on his or her opinion, or based on some questionable authority, like god, a questionable economist, or the authority of the general opinion or general knowlodge.
Thank you for your comments, Andre. As I wrote above several times, all of us go through the same process. “We all go through this same conflict at various levels, and we will continue to do so.”
However you refused to see this. You tuned it out because, for you, one of us must be “smarter” than the other, or "superior to" the other -- and the "superior" one is obviously you with your little slogans.
I appreciate your frustration. Clearly you are very young, and you want to be worshipped with awe. You flatter Tom Hickey in a desperate attempt to get people on "your side." However you will never win. You can’t win.
You can, however, continue to grow and learn like the rest of us.
Thank you again for having commented. Have a nice day.
Humans begin thinking about issues using suppositions. The source(s) of these suppositions are diverse and controversial.
Suppositions are the basis of (some) beliefs, opinions, and views, and some are formulated explicitly, while others remain largely implicit.
One use of supposition is assumption. Assumptions are both explicit (stated) and implicit (hidden).
Suppositions that result in assumptions are used to make claims about issues.
Claims call for justification, and justification involve criteria. Criteria are controversial.
Argument and debate involves putting forth assumptions as claims and defending them against opposing views.
Where opponents agree on criteria, a debate can be framed in logical terms. Where they don't, not. The alternatives are agreeing to disagree, walking away mad at the other party(s), or entering into conflict.
One problem in discussing issues is that some apparently descriptive claims are not only assertions but also have a normative component in that they function as criteria and therefore are foundational to the framework. Such criteria define the boundaries of views as systems of suppositions.
Generally speaking, scientific method is based on logical reasoning from stipulated starting points (axioms, postulates) and subsequent empirical testing of hypotheses derived as theorems. Hypotheses are a type of claim that is specific enough to test empirically using data and protocols. Depending on the measurability of data, mathematics is used in the reasoning process for clarity, brevity and precision.
So when theories of examined, the role that various terms and propositions play needs to be determined and specified. Then analysis can be applied.
Modern science is presumed to rest on a foundation of open inquiry and debate. To save time specific debates are often vetted, e.g., peer review before publication.
Owing to nuance, complexity, hidden assumptions, etc., the issues are often cloudy and need to be clarified.
However, the clarification process often involves assumptions that are themselves controversial.
Needless to say, this may result in processes that are messy and contentious.
Consequently, Paul Feyerabend recommended an anarchistic approach to gaining knowledge in which nothing is automatically excluded from a place at the table based on fixed rules of the game, eg., because framing an issue from a particular angle decides the outcome in advance.
Claiming that “taxes drives money” is like claiming that traffic signals drive cars, or that rents drive a Monopoly board game, or that scoreboard points drive a football game.
All nonsense.
Humans drive cars, board games, football, and money. Humans make the rules. and humans change the rules. Humans decide whether to keep using money, with or without taxation.
You know this, but you are so used to thinking in slogans (e.g. “taxes drive money”) that you will now try to defend your slogan again. This makes you very predictable.
For me, ‘truth’ is a function of being. So a tree has a different truth to an ant or a tiger or a human or a being higher up the scale.
A human views truth through the medium of mind; so the analogy of a tower applies – looking out through different windows in the tower with different filters over them leads to different views.
I agree with the perennial wisdom that says everything these external eyes view is illusory and to see truth, we must look within. ‘When the eye is single, the body is full of light’. Only then does mind become an instrument, a ‘clear eye’ into the external world, that sees the (relative) truth of the external world – but still constrained by unfolding of being, and the illusory nature of the external world. If we want airports, we still need the intellectual functions.
So, minds may do battle; but it is because they are not focused in being. The heart celebrates life and uses mind to provide a material basis to that. Everyone on this planet could easily be made comfortable, if we valued and materialised that.
If you believe that this discussion is uninteresting and unproductive, just tell me that I will stop. I will not take it to a personal level in any way, I will not get offended and will not keep any grudges.
"Humans drive cars, board games, football, and money"
Well, the society and the economy are, by definition, a result of humans and their actions. Without humans and their actions, there is no society or economy, by definition. Everything in a society or economy is a result of humans and their actions one way or the other. I do not dispute that.
However, if I ask someone "what is this delicious cake made of?" and the answer is "molecules", I would answer "thank you for the obvious answer, but it did not help much. Are they chocolate molecules, sugar molecules, strawberry molecules or what?"
Money is the result of human action, but "taxes drive money" is a shorthand for a more complex concept that explains how human act to give value to money.
It is something like that: some humans act and, through some complex actions, gain legitimate monopoly over the violence. Such humans then act subjugating other humans, imposing taxes and penalties for those who do pay (including physical violence and prision and etc). The subjugated humans, in their complex minds and behavior, antecipates the physical punishment actions of the subjugators, and try to somehow earn the currency need to pay the taxes, whatever such currency may be. They will, through their actions, create demand (and value) for the currency. They can chose not to earn and use such currency, of course. History shows us that some subjugated people tried to resist, while other did not - it is very complex.
Of course, in modern democracies, things may be less aggressive and more agreed.
As you can see, at the end of the day, it is all human action, but a specific kind of human action. Economics is nothing more than predicting some kinds of human behavior.
I do not dispute that it is human action that drives currency value. What I am saying is that it is a specific kind of actions that give them value.
Without a group of humans acting as violence monopolizers and without the legal sanctions by them imposed, modern currency as we know it would not have value and would disappear.
"Taxes drive money" is just a short way of saying all this.
"If you believe that this discussion is uninteresting and unproductive, just tell me that I will stop.”
Actually I’m impressed that you are still in this thread. I thought you were closed minded, but I see that even if you disagree with someone, you have the sincerity and tenacity to keep chewing on the subject until you, or the other party, or both parties achieve some fresh insights.
I thought you just want to “win” but I see that you just want to understand. You look at someone’s claim, and you examine your own claim, seeking clarity by asking yourself, “Why do I believe what I believe?” You are the kind of person I value and admire.
When I accused you of being in a mental box, I meant that we are all in mental boxes. They are plateaus that we inhabit for a time before we move on. We go through this over and over.
Anyway I apologize for whatever annoyance or frustration I caused you to feel. I would like to continue corresponding with you about many topics.
I only commented on the “taxes drive money” because MMT people prioritize it in their discourse. I think it seduces people into falsely believing that monetarily sovereign governments need tax revenue in their own currency. From this it is a short step to the false claim that, “Social programs are unsustainable.”
Incidentally I agree that taxation is necessary when a new currency is first issued, since taxation causes people to become habituated to using the currency. But I assert that once a currency has been in use for several decades or even centuries, society becomes so accustomed to using it that society would continue to use that currency even if taxes were eliminated.
The Union government started issuing “greenback” dollars during the Civil War, and the Secret Service policed the use of the currency. However there was no IRS for the next 50 years, and still people used dollars.
Ultimately I suspect that we both agree. Any differences are just a question of wording.
"Ultimately I suspect that we both agree. Any differences are just a question of wording."
Probably that is the case...
"I only commented on the 'taxes drive money' because MMT people prioritize it in their discourse. I think it seduces people into falsely believing that monetarily sovereign governments need tax revenue in their own currency. From this it is a short step to the false claim that, 'Social programs are unsustainable.' "
Well, that is complicated. The MMT theory claims that taxes drive money and that the government can spend more than it earns because it is the issuer of the currency. Both claims do not contradict each other, although now that you said it, indeed it may create the impression that the government need to tax before spending. Maybe such shorthand is not so useful after all, but I guess most people already comfortable with MMT knows what is behind such "slogan" and that it does not mean that 'Social programs are unsustainable.'
Taxes drive money is an essential part of MMT, and nonetheless MMT is the first economic theory and only one that I know that claims that the government can (and in most cases should) spend more than it earns. Even Keynesians believed that a government could spend more than it earned just temporarily, and not always.
Here is a post written by Bill Mitchell that may be interesting for the discussion ("A simple business card economy"):
http://bilbo.economicoutlook.net/blog/?p=1075
Observation: Bill Mitchell believes that some social programs are unsustainable and may indeed be inflationary, like the Basic Income Guarantee.
I have been searching for evidence that contradicts the taxes drive money approach, and that supports the orthodox view (which I call "mass delusion theory", when all actors of the economy give value to money because they are delusional and believe that it has value somehow, and hence somehow the currency value converges to some level, then staying relative stable). I am always open to such discussions and would appreciate if you have something to show. Until now, I have not been able to "disprove" the taxes drive money thing and "prove" the orthodox theory.
21 comments:
This article demonstrates what I have referred to as “residual false beliefs.”
In the human mind there is no hard distinction between conscious and subconscious awareness. Instead, the human mind is like a spectrum in which one color fades into another color, which fades into another color. The conscious mind fades into the subconscious, which fades into deeper levels of the subconscious, and so on, deeper and deeper all the way down to your True Self, which is pure consciousness, and is in fact God.
Therefore you might disprove a person’s false belief at his conscious level (e.g. “money is physical and limited”), but his subconscious mind will continue to hold the false belief, and it will continue to make the false belief pop up in his conscious mind in myriad forms.
For example, this article promotes MMT, yet it is filled with false residual beliefs.
False residual belief: “Public borrowing is the difference between what the government spends and its income.”
No. “Public borrowing” is the amount of money that various parties have deposited in Bank of England savings accounts. Moreover the UK government creates its spending money out of thin air by crediting bank accounts, and therefore has no need for “income,” just as a sports scoreboard has no need for a “points income.”
False residual belief: “ “UK government spending can actually enable growth at a faster rate than increases in borrowing, meaning that over time the debt to GDP ratio can fall even if the spending is funded by borrowing.”
No. UK government spending is not funded by borrowing. The UK government creates its spending money. Hence the public debt-to-GDP ratio is meaningless for the UK. However the private debt-to-GDP ratio is crucial, because an economy can be crippled by high mortgage payments, high rents, student loan debt, “payday loan” debt, and so on.
False residual belief: “The Prime Minister has informed us that ‘there is no magic money tree.’ When money was backed by gold, there was some truth to this argument.”
No. There was never any truth to this argument. The “gold standard” was always a lie. It was a gimmick that the UK government abandoned whenever the government needed to create mass amounts of money for wars and so on.
The point here is that the author wants to believe Stephanie Kelton’s assertion that U.K. government spending is not like private household spending. However the author’s false residual subconscious beliefs keep popping up, such that the article is confusing and sometimes contradictory.
What I’m saying is that money issues are important to us all, and economics writers need to be more careful in their discourse and their thinking.
You might object that, “At least the author is promoting MMT, rather than lies.”
True, but I read the article twice, and it struck me as unnecessarily timid and complex. Let’s keep things clear and simple.
Here’s an example of fuzzy thinking…
The author says this: “The state asserts its monopoly power over the right to issue sterling by deeming it ‘legal tender’ and putting you in prison if you attempt to forge the currency.”
Correct. The UK pound sterling is backed by government laws, which may or may not include taxation. What gives value to money is not taxes, but laws (and social convention).
Then the author says this: “Why do we use the pound sterling? Ultimately, it is because of the state has determined that we must pay our taxes using these particular tokens.”
No. That’s a false residual belief popping up again, in this case the false mantra that “taxes drive money.”
What “drives money” is human activity governed by laws that may or may not include taxation.
Q. Why is this so hard to understand?
A. Residual false beliefs
Wow, very philosophical (and religious?) comment.
But I guess it is much simpler than that: those UCL IIPP Blog guys simply got it wrong. They do not know much about finance, economics or MMT, but decided to write a blog post anyway. It is as simple as that. They liked Stephanie Kelton and her proposals, but did not quite get it.
"Public borrowing is the difference between what the government spends and its income."
The wrong thing with this sentence is that the difference between what the government spends and its income can be covered with money issuance, something that the blog authors don't seem to understand.
You are saying more or less what I am saying, except for some technicalities. “Public borrowing is the amount of money that various parties have deposited in Bank of England savings accounts". Well, it depends on what you and public managers define as "borrowing". Usually bonds are considered "borrowing", and bank reserves are not. Hence, you could not claim that public borrowing is the amount that people have in Bank of England accounts. What definition for the word "borrowing" is the most useful for public management? I don't know.
"Correct. The UK pound sterling is backed by government laws, which may or may not include taxation. What gives value to money is not taxes, but laws (and social convention)".
I don't agree. What laws are you talking aobut? Give me an example.
If the UK government eliminated all taxes (and fee and fines), its currency would lose value to zero in a matter of weeks. All other laws and social conventions would not change that. They would, at best, delay the process.
@ ANDRÉ:
They do not know much about finance, economics or MMT, but decided to write a blog post anyway. They liked Stephanie Kelton and her proposals, but did not quite get it.
Correct. The authors liked what Kelton said, but they remain encumbered by their false beliefs.
“Public borrowing is the amount of money that various parties have deposited in Bank of England savings accounts.’ Well, it depends on what you and public managers define as ‘borrowing.’ Usually bonds are considered ‘borrowing,’ and bank reserves are not. Hence, you could not claim that public borrowing is the amount that people have in Bank of England accounts. What definition for the word ‘borrowing’ is the most useful for public management? I don't know.”
Let’s be crystal clear about this. When you deposit money in a regular bank, you lend your money to the bank. The bank is in debt to you for the amount of your deposit. If you purchase a Certificate of Deposit (CD) then you leave your money with the bank for an agreed-to amount of time in return for an agreed-to rate of interest from the bank. All banks are in debt to their depositors. During the term of the CD, you cannot spend your money. Hence your money becomes reserves for the bank.
The central bank is exactly the same, whether we speak of the Fed or the Bank of England. At the central bank, a Certificate of Deposit is called a Treasury security (or a “gilt” in the UK). You deposit your money in a central bank savings account (that is, you lend your money to the central bank) for an agreed-to amount of time in return for an agreed-to rate of interest from the bank. During the term of the Treasury security (or the “gilt” in the UK), you cannot spend your money. Hence your money becomes reserves for the central bank.
The central bank, like regular banks, is in debt to its depositors. This central bank’s debt to its depositors is called the “national debt.”
None of this has anything to do with the central GOVERNMENT’S ability to create money out of thin air and spend it into the economy.
"I don't agree. What laws are you talking about? Give me an example."
I refer, for instance, to federal laws that say the U.S. dollar or the U.K. pound sterling is legal tender for all debts public and private. For example, Section 5103 of title 31, United States Code says…
“United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.”
This does not ban people from using other forms of currency. It simply defines what a “dollar” is in a contract or obligation that is denominated in dollars. You could make a contract denominated in Bitcoin or euros if you want to.
Therefore I claim that the “taxes drive money” mantra is false and misleading. What “drives money” is human activity governed by laws that may or may not include tax laws.
“If the UK government eliminated all taxes (and fee and fines), its currency would lose value to zero in a matter of weeks. All other laws and social conventions would not change that. They would, at best, delay the process.”
What “drives” money is not taxes or anything else outside the human mind. We drive money by living in a consensus reality. A dollar has value because everyone agrees that it does. The U.K. has been using pounds sterling by social agreement for 1,222 years. Do you think this agreement would end if the U.K. government lowered taxes to zero, while keeping currency laws in place?
If so, then this is your false residual beliefs kicking in. You heard someone say that “taxes drive money,” and you imprinted this on your mind.
Since the imprint is subconscious, it distorts your conscious intellect.
Human activity comes first. Laws and social agreements come second. Taxes come third. This is what "drives money."
It’s an interesting question: - what ‘drives’ the Queen of England to be queen? And her subjects to be subservient? If everyone woke up tomorrow and the very idea of royalty had been washed from mind(s) – then who would she be? Konrad says her ghost would have to be washed from the subconscious too – like an echo chamber :-)! Who would pay her bills! The look on her face would be like the look on the minister’s faces of the Howard govt. (Aus) after they lost the election. Who am I? Especially if queen was washed from her mind too.
No wonder Lewis Carroll wrote ‘Alice’.
Curiouser and curiouser!” Cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English).
"I refer, for instance, to federal laws that say the U.S. dollar or the U.K. pound sterling is legal tender for all debts public and private."
First of all, there are a lot of countries with no legal tender laws in place, and they still have their own local currency, because taxes are what drive money, not legal tender laws.
Second, the legal tender laws in practice are non binding and non enforceable. If two people want to denominate and exchange things (and contracts) in a foreign currency or in anything else but the local currency, they will, and the government usually does not chose to interfere - as history has shown us. Also, it would be extremely costly to interfer. It is not easy to monitor and control all transactions of a economy. There are a few judicial cases where one party demands to the other to be paid in the local currency instead of the currency agreed in the contract, but they represent at best a very tiny (and neglectable) amount of transactions in the economy.
Third, legal tender laws do not stipulate that a dollar is worth the same as 1 kg of corn or anything like that. Legal tender laws do not control the value of the currency in any meaningful way.
Legal tender laws do not drive the value of currency.
Tradition and customs may give some stability for the value of the currency for some time, as history has also shown us (when some countries eliminated their currencies but some people still used it for some time), but just for some time.
Of course, there could be a lot of laws or traditions driving somehow the value of currency. But, today, in modern monetary economies like US or Japan or UK, taxes are the kind of laws and social agreements that drive currency.
I do not dispute the fact that in other institucional arrangements there could be another kinds of law driving the currency, but that is simply not the case in modern monetary countries.
"You heard someone say that “taxes drive money,” and you imprinted this on your mind."
I don't know what you mean by that. I read a lot of MMT material, compared it with real world evidence, and arrived at the conclusion that taxes indeed do drive money. I call it learning, but if you call it "imprinting", then I am fine with it.
"Do you think this agreement would end if the U.K. government lowered taxes to zero, while keeping currency laws in place?"
Yes, I do. The currency would disappear.
About the "borrowing" thing, I will write a separate answer to that... this one is big enough
"The central bank, like regular banks, is in debt to its depositors."
Yes, I do agree that bank reserves, notes and coins in circulation, and government bonds are all public liabilities (or public debt, if you wish). I'm not disputing that.
However, wording is important. For me, a loan is a special kind of liability (debt). One of its specific characteristics is that it is interesting bearing, while other kinds of debt are not. Hence, with that definition in mind, government bonds are a kind of loan, while notes and coins are not.
“Public borrowing”, in the definition of many economists, is about loans. When someone claims that the government borrows, it also means that it pays interest. Issuing notes and coins is not “borrowing”, although it is debt issuance nonetheless.
Of course, all that discussion is dependent on the definition of the words “debt”, “loan”, and “borrowing”. And such discussion does not change the fact that bank reserves, notes and coins in circulation, and government bonds are all public liabilities.
"It’s an interesting question: - what ‘drives’ the Queen of England to be queen? And her subjects to be subservient? If everyone woke up tomorrow and the very idea of royalty had been washed from mind(s) – then who would she be"
Well, isn't it too philosophical? I mean, what would happen if some aliens got here on earth and brainwashed everyone, making everybody forget everything? We all would be like just born babies and probably would die of hunger... so what?
I guess we should get a little more down-to-earth to have a meaningful discussion, I don't know.
The Monarch of England was the one who successfully could lay claim to the monopoly of the legitimate use of physical violence within England territory, in my mind.
Maybe such claim could be achieved through war and violence, maybe through diplomacy and alliances... history is there to tell us that it is a complex matter. But mass delusion doesn't seem to be a very productive way of approaching the matter...
“First of all, there are a lot of countries with no legal tender laws in place, and they still have their own local currency, because taxes are what drive money, not legal tender laws.”
Wrong. Humans make laws and currencies, and humans unmake them. What “drives” money is human activity and human agreement.
As I said, you heard the false slogan that “taxes drive money,” and you chose to imprint that false slogan on your mind. In doing so, you created a mental box that you desperately try to justify by repeating the slogan over and and over.
If taxes fell to zero, everyone would still want and use dollars. To claim that the “currency would disappear” like smoke in the wind is silly.
That’s okay. Life is a process of spinning ourselves into cocoons, and staying for a while in our cocoons (sometimes a long while) until we eventually emerge with new insight. Then we repeat the process. Enjoy your cocoon.
Regarding money as debt, I have discussed this at length in previous comments to other blog posts. All money is debt, but not all debts involve loans.
If you could explain better your claims and provide some evidence, I would be able to assess them. And then I would be able to exit the supposed "cocoon".
But if instead you prefer to profess some unecessary allegories and metaphors, nothing will change.
@ Andre
Hi Andre. Yes, of course at extremis anything becomes nonsensical: - it was Konrad’s “residual subconscious beliefs” which sparked the comment.
Just playing with the fanciful imagination a little to say whatever is in the mind, generally, has limited reality. I didn’t want to say ‘mass delusion’ but that would be a good platform for discussion. For example the physicists all look at each other nervously and awed, saying the material world is an illusion (something that pretends to be one thing and is in reality another) – disappearing as it does, over an ‘energy horizon’. Out of the mists of that horizon Life, Consciousness and Intelligence appear, in a form – how far back would you say the pattern for the ‘Queen of England’ goes?? Doesn’t mean you won’t have to pay your and her electricity bill, up until the point people change their minds. Mind is another good subject for discussion, since we all have one and use it. Look how it takes people out into the desert and dumps them there (another way of saying war begins in the minds of men)!
I have been crystal clear in my explanations. The reason why nothing will change in your mind is that, for the time being, you choose to cling to false beliefs. For you to mature beyond your false beliefs, you must choose to do so. No one can force you to choose. You will emerge from your current mental box when you are ready. Then you will repeat the process on the next level.
Deep down you know that I am correct, but your desire to awaken is in conflict with your desire to remain asleep in your current mental box, which is composed of false beliefs.
That's okay. We all go through this same conflict at various levels, and we will continue to do so. It's part of life. It's part of the evolutionary process.
Enjoy the journey.
Konrad, if I am understanding it right, you believe yourself to be more evolved, a superior man, the awaken, the mature, the one who claims to know some sort of superior truth. But I cannot see how.
You claim that I read a "false slogan that taxes drive money".
However, I claim that you read a false slogan that "legal tender laws drive money".
What is the difference between my claim and your claim?
I answer: my claim is supported by real evidence that legal tender laws are meaningless and do not affect society or economy in any meaningful way. I can show you a lot of research supporting it. Or even better: you can search such material yourself, if you chose to emerge from your current mental box.
In the end, it is real world evidence that counts, and not your opinion or my opinion.
If I got it right, you are unable to explain your claims in detail, and show any evidence that support your claims, and why and how legal tender laws drive money (or other laws, which you did not specify). If you cannot explain or give some evidence, as weak as they may be, then you are not so superior as you think you are.
Short lesson in epistemology, which is the branch of knowledge that studies knowledge (versus opinion, belief, etc.)
This inquiry began in earnest in the West with Plato's Dialogues, which form the basis for the Platonic dialectic.
A key question is what distinguishes knowledge from belief, opinion, imagination, supposition, assumption, etc.
The general answer is that knowledge is justified as being true, while the others are only assumed.
Justification implies decision criteria for judgment, since truth is a matter of discrimination and judgment, which is a function of intellect as the faculty of judgment.
Several criteria are proposed and some generally accepted while others not.
1. Evidence based on empirical data that are publicly available for verification.
2. Sound reasoning based on valid inference from premises known to be true.
3. Authority.
4. Analogy.
5. The fifth is what might be called "principles," "causes," and "reasons."
The first two are generally accepted and the second two disputed. Not that are aren't issues involving the first two.
These are the most controversial and there is little agreement on them. The different views are part of the foundation of different schools of thought.
So basically, the positivist solution that places all emphasis on #1 (sense observation) and # 2 (sound reasoning from premises known to be true based on #1) is generally accepted. But true positivists deny or marginalize the other criteria and now all are willing to do this.
So there is still fundamental disagreement over the foundations of epistemology.
Add to this the relativism of worldviews and there is wide room for controversy over "truth."
The skeptical view is that there is no established truth.
There are various forms of skepticism.
"Science" traditionally means true knowledge. But modern science is foundationally skeptical because scientific knowledge is tentative wrt future discovery.
Tom, that is finally some interesting/useful philosophy.
I would say that both 1 and 2 emanates from empirical evidence. A claim is true if it is supported by real world evidence or by logical inferences totally derived from other claims already supported by real world evidence.
I also would like to add that we will never be able to know if a claim/hypothesis is 100% true, even if there is plenty of evidence supporting it. That is how life goes. For some time, some people thought that Newton, with his physics theories, had discovered the absolute truth, the equations made by god himself or something like that. But then new theories emerged questioning the theory, like Einstein's Relativity. That is life.
However, it is unwise, unscientific, and unproductive when someone is arrogant and claims that something is true or false without any kind of even feeble evidence, based solely on his or her opinion, or based on some questionable authority, like god, a questionable economist, or the authority of the general opinion or general knowlodge.
Thank you for your comments, Andre. As I wrote above several times, all of us go through the same process. “We all go through this same conflict at various levels, and we will continue to do so.”
However you refused to see this. You tuned it out because, for you, one of us must be “smarter” than the other, or "superior to" the other -- and the "superior" one is obviously you with your little slogans.
I appreciate your frustration. Clearly you are very young, and you want to be worshipped with awe. You flatter Tom Hickey in a desperate attempt to get people on "your side." However you will never win. You can’t win.
You can, however, continue to grow and learn like the rest of us.
Thank you again for having commented. Have a nice day.
Humans begin thinking about issues using suppositions. The source(s) of these suppositions are diverse and controversial.
Suppositions are the basis of (some) beliefs, opinions, and views, and some are formulated explicitly, while others remain largely implicit.
One use of supposition is assumption. Assumptions are both explicit (stated) and implicit (hidden).
Suppositions that result in assumptions are used to make claims about issues.
Claims call for justification, and justification involve criteria. Criteria are controversial.
Argument and debate involves putting forth assumptions as claims and defending them against opposing views.
Where opponents agree on criteria, a debate can be framed in logical terms. Where they don't, not. The alternatives are agreeing to disagree, walking away mad at the other party(s), or entering into conflict.
One problem in discussing issues is that some apparently descriptive claims are not only assertions but also have a normative component in that they function as criteria and therefore are foundational to the framework. Such criteria define the boundaries of views as systems of suppositions.
Generally speaking, scientific method is based on logical reasoning from stipulated starting points (axioms, postulates) and subsequent empirical testing of hypotheses derived as theorems. Hypotheses are a type of claim that is specific enough to test empirically using data and protocols. Depending on the measurability of data, mathematics is used in the reasoning process for clarity, brevity and precision.
So when theories of examined, the role that various terms and propositions play needs to be determined and specified.
Then analysis can be applied.
Modern science is presumed to rest on a foundation of open inquiry and debate. To save time specific debates are often vetted, e.g., peer review before publication.
Owing to nuance, complexity, hidden assumptions, etc., the issues are often cloudy and need to be clarified.
However, the clarification process often involves assumptions that are themselves controversial.
Needless to say, this may result in processes that are messy and contentious.
Consequently, Paul Feyerabend recommended an anarchistic approach to gaining knowledge in which nothing is automatically excluded from a place at the table based on fixed rules of the game, eg., because framing an issue from a particular angle decides the outcome in advance.
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IN A NUTSHELL…
Claiming that “taxes drives money” is like claiming that traffic signals drive cars, or that rents drive a Monopoly board game, or that scoreboard points drive a football game.
All nonsense.
Humans drive cars, board games, football, and money. Humans make the rules. and humans change the rules. Humans decide whether to keep using money, with or without taxation.
You know this, but you are so used to thinking in slogans (e.g. “taxes drive money”) that you will now try to defend your slogan again. This makes you very predictable.
Proceed…
For me, ‘truth’ is a function of being. So a tree has a different truth to an ant or a tiger or a human or a being higher up the scale.
A human views truth through the medium of mind; so the analogy of a tower applies – looking out through different windows in the tower with different filters over them leads to different views.
I agree with the perennial wisdom that says everything these external eyes view is illusory and to see truth, we must look within. ‘When the eye is single, the body is full of light’. Only then does mind become an instrument, a ‘clear eye’ into the external world, that sees the (relative) truth of the external world – but still constrained by unfolding of being, and the illusory nature of the external world. If we want airports, we still need the intellectual functions.
So, minds may do battle; but it is because they are not focused in being. The heart celebrates life and uses mind to provide a material basis to that. Everyone on this planet could easily be made comfortable, if we valued and materialised that.
"Proceed…"
If you believe that this discussion is uninteresting and unproductive, just tell me that I will stop. I will not take it to a personal level in any way, I will not get offended and will not keep any grudges.
"Humans drive cars, board games, football, and money"
Well, the society and the economy are, by definition, a result of humans and their actions. Without humans and their actions, there is no society or economy, by definition. Everything in a society or economy is a result of humans and their actions one way or the other. I do not dispute that.
However, if I ask someone "what is this delicious cake made of?" and the answer is "molecules", I would answer "thank you for the obvious answer, but it did not help much. Are they chocolate molecules, sugar molecules, strawberry molecules or what?"
Money is the result of human action, but "taxes drive money" is a shorthand for a more complex concept that explains how human act to give value to money.
It is something like that: some humans act and, through some complex actions, gain legitimate monopoly over the violence. Such humans then act subjugating other humans, imposing taxes and penalties for those who do pay (including physical violence and prision and etc). The subjugated humans, in their complex minds and behavior, antecipates the physical punishment actions of the subjugators, and try to somehow earn the currency need to pay the taxes, whatever such currency may be. They will, through their actions, create demand (and value) for the currency. They can chose not to earn and use such currency, of course. History shows us that some subjugated people tried to resist, while other did not - it is very complex.
Of course, in modern democracies, things may be less aggressive and more agreed.
As you can see, at the end of the day, it is all human action, but a specific kind of human action. Economics is nothing more than predicting some kinds of human behavior.
I do not dispute that it is human action that drives currency value. What I am saying is that it is a specific kind of actions that give them value.
Without a group of humans acting as violence monopolizers and without the legal sanctions by them imposed, modern currency as we know it would not have value and would disappear.
"Taxes drive money" is just a short way of saying all this.
"If you believe that this discussion is uninteresting and unproductive, just tell me that I will stop.”
Actually I’m impressed that you are still in this thread. I thought you were closed minded, but I see that even if you disagree with someone, you have the sincerity and tenacity to keep chewing on the subject until you, or the other party, or both parties achieve some fresh insights.
I thought you just want to “win” but I see that you just want to understand. You look at someone’s claim, and you examine your own claim, seeking clarity by asking yourself, “Why do I believe what I believe?” You are the kind of person I value and admire.
When I accused you of being in a mental box, I meant that we are all in mental boxes. They are plateaus that we inhabit for a time before we move on. We go through this over and over.
Anyway I apologize for whatever annoyance or frustration I caused you to feel. I would like to continue corresponding with you about many topics.
I only commented on the “taxes drive money” because MMT people prioritize it in their discourse. I think it seduces people into falsely believing that monetarily sovereign governments need tax revenue in their own currency. From this it is a short step to the false claim that, “Social programs are unsustainable.”
Incidentally I agree that taxation is necessary when a new currency is first issued, since taxation causes people to become habituated to using the currency. But I assert that once a currency has been in use for several decades or even centuries, society becomes so accustomed to using it that society would continue to use that currency even if taxes were eliminated.
The Union government started issuing “greenback” dollars during the Civil War, and the Secret Service policed the use of the currency. However there was no IRS for the next 50 years, and still people used dollars.
Ultimately I suspect that we both agree. Any differences are just a question of wording.
"Ultimately I suspect that we both agree. Any differences are just a question of wording."
Probably that is the case...
"I only commented on the 'taxes drive money' because MMT people prioritize it in their discourse. I think it seduces people into falsely believing that monetarily sovereign governments need tax revenue in their own currency. From this it is a short step to the false claim that, 'Social programs are unsustainable.' "
Well, that is complicated. The MMT theory claims that taxes drive money and that the government can spend more than it earns because it is the issuer of the currency. Both claims do not contradict each other, although now that you said it, indeed it may create the impression that the government need to tax before spending. Maybe such shorthand is not so useful after all, but I guess most people already comfortable with MMT knows what is behind such "slogan" and that it does not mean that 'Social programs are unsustainable.'
Taxes drive money is an essential part of MMT, and nonetheless MMT is the first economic theory and only one that I know that claims that the government can (and in most cases should) spend more than it earns. Even Keynesians believed that a government could spend more than it earned just temporarily, and not always.
Here is a post written by Bill Mitchell that may be interesting for the discussion ("A simple business card economy"):
http://bilbo.economicoutlook.net/blog/?p=1075
Observation: Bill Mitchell believes that some social programs are unsustainable and may indeed be inflationary, like the Basic Income Guarantee.
I have been searching for evidence that contradicts the taxes drive money approach, and that supports the orthodox view (which I call "mass delusion theory", when all actors of the economy give value to money because they are delusional and believe that it has value somehow, and hence somehow the currency value converges to some level, then staying relative stable). I am always open to such discussions and would appreciate if you have something to show. Until now, I have not been able to "disprove" the taxes drive money thing and "prove" the orthodox theory.
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