tag:blogger.com,1999:blog-2761684730989137546.post6882750727925521160..comments2024-03-28T04:13:36.779-04:00Comments on Mike Norman Economics: Let's end the "money printing, dollar debasing" argument once and for all.mike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger110125tag:blogger.com,1999:blog-2761684730989137546.post-36798121661189515752011-12-12T10:08:54.738-05:002011-12-12T10:08:54.738-05:00I've managed to take away some interesting poi...I've managed to take away some interesting points from the article and comments. And a bit of a headache too haha.<br /><br />Just chiming in with the debasement of the currency issue.. I'll just let these charts that I've come up with explain themselves.<br /><br />http://grab.by/bo6DJeremynoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-11857286907454541442011-08-15T12:03:47.700-04:002011-08-15T12:03:47.700-04:00great points art. I agree with you and probably th...great points art. I agree with you and probably that kind of a logic thread would appeal to more people b/c it isn't "throwing gold out the window" immediately, but rather more accurately exlaining it. <br /><br />"They might explain some of the bid for gold too."<br /><br />how is that? I am not seeing the connection.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-8667356773254001882011-08-14T11:39:34.350-04:002011-08-14T11:39:34.350-04:00Good insight on thinking of gold as money and what...Good insight on thinking of gold as money and what they implies, art. I think you are right that it is good way of catching on to MMT.<br /><br />Fits into the MMT point that convertibility and fixed rates hamper domestic fiscal policy wrt adjusting fiscal balance for changes in sectoral balances. The cb cannot create gold, and the focus has to be on BoP and the fx rate instead of domestic policy. This is the basis of the MMT argument for the superiority of a non-convertible floating rate.<br /><br />As long as gold is thought of as "the world's money," then mercantilism rules, threatening wars, and governments are put in fiscal straightjackets that lead to high unemployment and depressions.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-12696592676774387472011-08-14T10:58:27.929-04:002011-08-14T10:58:27.929-04:00Mike, I agree that the Fed doesn't net add to ...Mike, I agree that the Fed doesn't net add to financial assets under "normal" operations, but it does when it engages in other operations such as purchasing of non-USG securities and paying interest on reserves, doesn't it? <br /><br />BTW, great point re the swap lines. Add in forex measures taken by govts of exporting-oriented economies (who despite their bluster still want to sell stuff to us). USD would be considerably stronger if not for those interventions, I think. They might explain some of the bid for gold too.arthttp://www.symmetrycapital.netnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-66349642503660973952011-08-14T10:52:25.266-04:002011-08-14T10:52:25.266-04:00Tom Hickey, re "Gold doesn't actually det...Tom Hickey, re "Gold doesn't actually determine value any more than paper. Like paper, gold is only valuable because it is traditionally valued."<br /><br />I'm not sure we should dismiss it that easily. Milton Friedman's commodity theory of money, which may have as its basis a brief footnote in Frank Knight's Risk, Uncertainty and Profit, comes closer I think. And they're empirically supported by Summers and Barsky's paper on Gibson's Paradox and the Gold Standard. The idea is that gold stocks accumulated at a pace that approximated that of real capital accumulation over a long period of time, implying appropriate additions to the monetary stock, accomodation of normal savings desires, etc. Of course, it did a pretty lousy job of it over anything but the very long-term, and then only if you chose the correct endpoints. Otherwise it was usually a chaotic process with long-term shortages of gold and resulting recessions and depressions punctuated by a few large discoveries. <br /><br />But rather than brushing gold aside, I think it offers an intriguing way to finally get MMT or similarly sound schools of thought into mainstream macro. Once you get your head around the fact that (1) gold mines had to run perpetual deficits of gold, (2) cumulative gold output was not in any way a liability of gold mines, and (3) sovereign govts now occupy the role that gold mines once played, then the rest should fall into place, I think. That's how the MMT bulb switched on for me, anyways.arthttp://www.symmetrycapital.netnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-1440002310438810672011-08-03T00:55:53.827-04:002011-08-03T00:55:53.827-04:00@ shaun
"The Central bank will increase its...@ shaun <br /><br />"The Central bank will increase its reserves in order to increase the monetary base. This is achieved by the Central bank purchasing assets and in turn crediting reserve banks. From this the money supply increases that is related to the monetary base by some ratio?"<br /><br />As I understand it it'd would be more apt to think of the CB as just creating reserves out of thin air. Poof!! Reserves exist!! They can do this b/c of the treasuries that are owned by Primary Dealers (aka big banks essentially). The PD's got those treasuries b/c they bought them from the Treasury whenever the government spent. The Treasury is apparently by law not able to use dollars so they use bonds instead and they are also not able to sell directly to the Fed their bonds, so they go through Primary Dealers which marks up the Treasury's account at the Fed. It's basically a big old kabuki dance that gives banks tons and tons of free money for doing nothing whatsoever. So anyway, the Fed buys those treasuries that are owned by the PD's and that creates reserves (digital cash) for those PD's now. The PD's gave up the treasuries and now got cash instead. This lowers the fed funds rate b/c their reserve levels are higher now...however nothing has actually changed in the ACTUAL economy b/c buying and selling treasuries between the Fed and banks doesn't help Joe-on-the-street be able to now afford to take out a car loan for example. His income level is still the same...unless he has good credit and wants to just get something he can't afford (aka that's unsustainable). <br /><br />I think it's fair to think of the monetary base as an infinite source so long as there are treasuries in the system for the Fed and banks to exchange. It would be interesting to think of a scenario where if the government did balance its budget such that no more treasuries existed in the system (that would mean no more spending at all I guess) or at least that there were not enough treasuries in existence for the Fed and banks to properly achieve a target rate...is that even possible of occurring? Does anyone know about that by chance?<br /><br />I find it humorous when people say "the debt is 14 TRILLION dollars. That's huge man!!!"...it reminds me of a child looking up at the stars and trying to conceive of exactly how many are up there. What's that number man?!?! It's all very innocent, naive, and cute. LOL <br /><br />So the Fed's liabilities in terms of reserves issued to banks doesn't really matter and it really doesn't matter for the Fed if those loans default b/c they can always just make more reserves...it does matter for that bank however if the loans default though (unless of course Uncle Sam lends a hand!!!). Ultimately though what always matters is the quality of the loans the banks are making. QE 2 does nothing b/c it is simply the process of exchanging treasuries which banks own for digital cash which the Fed gives them. That's all. It's really no different than the Fed setting the target rate. I think the difference with QE 2 was they were apparently targeting treasuries further out on the curve in an attempt to effect mortgage rates and investor confidence in the USA or something like that. LOL<br /><br />Maybe that'll help clear things up for you Shaun. If I'm off on any of this feel free to chime in someone.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-88966966476440528562011-07-22T18:12:47.917-04:002011-07-22T18:12:47.917-04:00"Lets see if I understood what you said corre..."Lets see if I understood what you said correctly. The Central bank will increase its reserves in order to increase the monetary base. This is achieved by the Central bank purchasing assets and in turn crediting reserve banks. From this the money supply increases that is related to the monetary base by some ratio ?"<br /><br />Not quite. The Fed issues reserves as it liabilities in exchange for an asset, usually a tsy. When the Fed buys a tsy, then the tsy is added to the Fed's asset account and reserves are added to its liability account. The bank selling the tsy markes down its tsy asset account and marks up its bank reserve account, also an asset. This relfect a change in composition and duration of the bank's assets. This keeps the amount of tsys the same, with ownership changing from private to public. The Fed reserves increase, which adds to the monetary base.<br /><br />There is no transmission mechanism from the monetary base (bank reserves) to the money supply (credit money) because banks do not lend out reserves nor do that lend reserves. They must have reserves to settle and also to meet the reserve requirement. The reserves are obtained after a loan as created a deposit.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-6584367429031966772011-07-21T23:36:50.588-04:002011-07-21T23:36:50.588-04:00Thankyou Tom for responding to my question.
Sorr...Thankyou Tom for responding to my question.<br /><br /><br />Sorry I'm not well versed in economics. I am a programmer and have taken an interest in Bitcoin, which is a crypto-currency. Hence I wish to understand how the current currency system works in order to understand the flaws of Bitcoin. Possibly the knowledge gained here will help to refine Bitcoin, which may lead to the evolution of a new currency system. <br /><br /><br />Anyways, it seems I should have been using the term "monetary base" rather than money supply. <br /><br />Lets see if I understood what you said correctly. The Central bank will increase its reserves in order to increase the monetary base. This is achieved by the Central bank purchasing assets and in turn crediting reserve banks. From this the money supply increases that is related to the monetary base by some ratio ?Shaunnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-55429652903580609482011-07-21T11:04:33.303-04:002011-07-21T11:04:33.303-04:00QE increases bank reserves (monetary base). The mo...QE increases bank reserves (monetary base). The money supply is endogenous and is chiefly influenced by private lending. There is no transmission mechanism between reserves (monetary base) and money in circulation.<br /><br />If non-banks sell tsys during QE, their deposit accounts get marked up, and that is an increase in the money supply. But that money has to be spent to have an effect. Instead of that happening, it has been saved in other financial instruments, often using leverage, and this has likely contributed to the rise in some asset prices, like equities and commodities.<br /><br />Monetary policy is not effective in addressing either inflation or deflation because it doesn't affect the amount of non-government net financial assets, hence, effective demand.<br /><br />Interest rate management and QE have not been successful.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-10948510110850957112011-07-21T05:21:52.961-04:002011-07-21T05:21:52.961-04:00Hi,
I have some questions. TIA
An increase in t...Hi, <br /><br />I have some questions. TIA<br /><br />An increase in the money supply is caused by the Fed purchasing assets ? <br /><br />And the majority of these assets are U.S government backed securities. Then this would mean; Government issues debt -> Private holder -> Central bank. Is that correct ?<br /><br />And to combat deflation the money supply in the economy would need to grow over time ? <br /><br />Therefore the account reserves of federal banks will need to increase over time?Shaunnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-29080538496970078832011-07-18T12:55:43.325-04:002011-07-18T12:55:43.325-04:00Sorry, googlehiem, it ain't over until ther fa...Sorry, googlehiem, it ain't over until ther fat lady sings.<br /><br />@ Calgacus<br /><br />AgreedTom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-29026170937809411542011-07-18T06:40:29.634-04:002011-07-18T06:40:29.634-04:00I just wanted to leave the last comment on this th...I just wanted to leave the last comment on this thread since it is the longest ever on this blog with the biggest number of entries !googleheimhttps://www.blogger.com/profile/14459089745473598235noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-89498250230013513812011-07-18T04:10:46.206-04:002011-07-18T04:10:46.206-04:00@Tom:While this is essentially correct, the term &...@Tom:<i>While this is essentially correct, the term "fiat money" is generally applied to non-convertible floating rate currencies.</i> Yes, but that does not remove the fact that "fiat money" or credit/debt is the essence of "money". Money is born fiat, yet it is everywhere foolishly constrained. :) <br /><br />Thinking of fiat money as "non-convertible floating rate", rather than what money <i>is</i> is as strange as talking about ordinary people as "non-muzzled un-straitjacketed" people. Having a special word for this ordinaryness, and over-restricting it, creates the misleading impression that there is something restricting the universal application of the theory and sows needless confusion and doubt in people like FEAOSP.<br /><br />The MMTers and other post-Keynesians and institutionalists have done a great job of cutting away the BS in economics. But they should step back and look at still unnecessarily complex and confusing terminology, the organization and exposition of their theories, and the residue which remains from the "dark age of macroeconomics" which creates a great barrier to understanding.<br /><br />They haven't, and some leading MMTers are worse than others in their inattention to, or bad choice of language, or worst of all bad theories of how language should be chosen. There are philosophical papers on concepts - But they aren't sufficiently applied to shorten and clarify, as they easily could be. Taking the time to write short letters - even more than Abba Lerner did, who was great at this difficult task, would reap enormous dividends.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81619739031883077612011-07-17T23:22:23.653-04:002011-07-17T23:22:23.653-04:00It is not casually that the word “paradigm” is app...<i>It is not casually that the word “paradigm” is applied to the MMT perspective. There is a gestalt-like shift that occurs when one “gets” it. It’s like suddenly seeing an optical illusion the “other” way – you can’t go back and only see it the way you did before. This shift is a very difficult thing to try to educe from someone.</i><br /><br />so true and I totally agree with you and think that your search for fitting analogies and metaphors is a great idea and a worthy venture. God speed to you good sir!!!<br /><br />And of course share whatever you learn with us and we'll spread the word too!Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-39810137712899674572011-07-17T22:50:00.809-04:002011-07-17T22:50:00.809-04:00@ Mario,
Right, Austrians generaly deny "2. ...@ Mario,<br /><br />Right, Austrians generaly deny "2. Money is always debt; it cannot be a commodity from the first proposition because if it were that would mean that a particular good is buying goods." They hold that "real money" is a commodity and all transactions are then reduced to barter transactions. A. Mitchell Innes refuted this position in his articles <a href="http://mmtwiki.org/wiki/Credit-based_Money" rel="nofollow">here</a>.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-57765701148161539112011-07-17T21:16:22.778-04:002011-07-17T21:16:22.778-04:00@Calgacus – Thank you for your confirmation. The F...@Calgacus – Thank you for your confirmation. The FESP Party platform has as a prominent plank (how’s that for alliteration?) the Job Guarantee, which I’ve been distributing to elected officialdom and policy- and opinion-makers in the U.S. as best I can.<br /><br />@Tom – As you point out, there can be a perverse pleasure in baiting gold bugs, but I am not interested in persuading them. They are convicted and largely immune to opposing views. The action is in the Great Middle, that vast majority who either have never thought about these things or who have been captured by the gold bugs’ rhetoric and imagery (e.g., the ubiquitous household analogy) but without any real ideological, professional, or emotional attachment. The content and form of effective persuasive techniques for this audience needs a lot of attention.<br /><br />@Craig – I submit that language <i>is</i> metaphor and that effective persuasive communication requires a crafting of language that starts where the audience is now, and brings them along to where you are. Straightforward language from one’s own perspective is often ineffective because there are not common referents in the words and ideas we use. The problem compounds with abstraction, and many of the terms used in the MMT community (and socio-econo-politics in general) are high-level abstractions that can require a lot of work to identify and agree upon common referents. It’s certainly not one-size-fits-all. We need a whole lexicon of vocabulary, analogies, data, stories, and other techniques to draw upon for this work.<br /><br />It is not casually that the word “paradigm” is applied to the MMT perspective. There is a gestalt-like shift that occurs when one “gets” it. It’s like suddenly seeing an optical illusion the “other” way – you can’t go back and only see it the way you did before. This shift is a very difficult thing to try to educe from someone.Full Employment and Stable Prices Partyhttps://www.blogger.com/profile/04610345356253068630noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-91892313603512041062011-07-17T20:52:00.852-04:002011-07-17T20:52:00.852-04:00Calgacus: "Money intrinsically and essentiall...Calgacus: "Money intrinsically and essentially is and always has been fiat money, a form of debt. A gold standard just sets the price of gold in terms of currency, and thereby puts an artificial constraint on it."<br /><br />While this is essentially correct, the term "fiat money" is generally applied to non-convertible floating rate currencies.<br /><br />Your point is correct because convertible fixed rate currencies backed by commodities like gold don't get their value from the commodity, which serves as merely a fetish disguising the fact that all money is debt-based, i.e,, as someone's asset, it is someone else's liability.<br /><br />"1. As Clower (1965) famously put it, money buys goods and goods buy money, but goods<br />do not buy goods.<br />2. Money is always debt; it cannot be a commodity from the first proposition because if it were that would mean that a particular good is buying goods.<br />3. Default on debt is possible."<br /><br />"Money" by L. Randall Wray, Levy Economics Institute of Bard College, Working Paper nol 646, Dec 2010.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-6738773763626151292011-07-17T20:37:22.813-04:002011-07-17T20:37:22.813-04:00the other thing with gold bugs is that most/many a...the other thing with gold bugs is that most/many are libertarians. And libs just despise the thought that government "controls" private sector wealth by how much it spends and taxes. <br /><br />Libs are desperate to think that the private sector is the ONLY PLACE where wealth begins, ends, and grows. Anything with the government is by definition evil and terrible and leads to problems. It's just that simple for them and they are NOT budging...even when they go visit a national or state park, take a dip in the ocean, or get a paycheck from a company that more than likely receives some type of government aide, subsidy, or contract. Once you track supply chain dynamics, it becomes even more likely that most businesses are directly or indirectly benefiting from the government, and our economy's breakdown shows this to be true anyway. Let alone the fact that the government creates all money in the first place. These are all sacrilege to libs...let alone the fact that bubbles came and went to the extreme under the gold standard as well, so the "limitations" of the gold standard really don't do anything but straight jacket ourselves...they do NOT change human sociological tendencies in an economy of scarcity. Period. Regulation of course would greatly help in that regard, but again, this seems to be another evil statement issued from the bowels of the great inferno. <br /><br />It's all a childish game for them playing make-believe cowboy and indian games, where I'm the good guy and you're the bad guy now let's fight it out and if I get shot all of a sudden I have an invincible cloak and you can't kill me...now I shoot you and bang you're dead! Game over. Let's play again and make up the rules in my favor as we go along as things don't exactly "pan out" the way I want them to. LOL It's nigh on impossible to discuss things with such people, and unfortunately they are very magnetic individuals and their message is so seemingly simple and "obvious" that others are receptive to it. I can understand since most people really don't care about the difference between the Treasury's balance sheet compared the Fed's and what a primary dealer is and how reserves work and what nfa is anyway. People's eyes roll over almost immediately with this stuff while at the same time our "economists" simply don't want to look at the cold hard facts about these things. This leaves us truth-seeking folk stuck between a rock and a hard place. We may just have to go along for a ride here and hopefully keep the communication alive and well all the while and eventually maybe people will start to catch on. Nothing is more transformational than pain and suffering. As my one friend says, "When you're sick and tired of being sick and tired, you'll change." Meanwhile we'll just keep pushing the MMT drink across the bar all the live-long day...sooner or later someone's going to come have a drink. ;)Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-38200412757437545372011-07-17T18:48:51.320-04:002011-07-17T18:48:51.320-04:00FESPP, there are two problems in dealing with gold...FESPP, there are two problems in dealing with gold bugs. First, they believe in the strict version of the quantity theory of money which says that an increase in the money supply translates into a corresponding increase in prices. No serious economist still thinks this. I has been diproven empirically and and rests of the unreasonable assumption that velocity of money and number of transactions are constant across time, which they manifestly are not. It's just silly.<br /><br />The larger problem is that with gold bugs, gold is a fetish, and it is near impossible to get people to abandon their fetishes.<br /><br />Ask them that if the amount of money remains constant over time, fixed by the gold supply, how they expect growth to be funded.<br /> <br />Also, when they point to a chart showing how money has declined in value, say, since the inception of the Fed in 1913, a favorite of theirs, ask them what happened to GDP over the same time frame. Are people better off now than they were in 1913? Is the standard of living lower? Request them to explain exactly what are they complaining about and what the problem is for them now? They will say, "hyperinflation," which is silly. They cannot give a cogent answer, and will just point at the chart again.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-4622357947257644552011-07-17T18:43:34.532-04:002011-07-17T18:43:34.532-04:00FEAOSP:Isn’t a gold standard currency, as generall...FEAOSP:<i>Isn’t a gold standard currency, as generally construed, just a subset of fiat currency? ... Each dollar still earns its way into circulation by extracting a dollar’s worth of resources from the real economy and converting that to wealth. </i> Yes, that is right, FEAOSP. All your observations are correct. Money intrinsically and essentially is and always has been fiat money, a form of debt. A gold standard just sets the price of gold in terms of currency, and thereby puts an artificial constraint on it. <br /><br />MMT applies to all monetary economies, commodity standard or not, capitalist or communist. The JG is just the ideal method of stabilizing currency value and increasing wealth - by putting the economy on a labor standard, rather than a gold standard.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46503159315101833312011-07-17T18:31:18.557-04:002011-07-17T18:31:18.557-04:00@FESPP - "What I wanted to explore is whether...@FESPP - "What I wanted to explore is whether there are similarities that address what federal spending actually is"<br /><br /><br />The federal government creates money, or government liabilities, through public spending. Once dollars are in circulation all user transactions net to zero because all asset transfers are offset by a corresponding liability transfer. At the end of each year taxes transfer dollars back to government which reduce government liabilities. When both parties sum their totals the issuer debt is dollar for dollar equal to the users savings. Government operates independent of it's users by creating money when it spends and destroying money when it taxes. Government deficits of the issuer results in savings by the currency user as a matter of accounting.Craig Austinhttps://www.blogger.com/profile/11181507887538340658noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-25543488815657625262011-07-17T18:04:58.394-04:002011-07-17T18:04:58.394-04:00@FESEPP
A gold-backed dollar served it's purp...@FESEPP<br /><br />A gold-backed dollar served it's purpose but is a relic of the past. The modern economy is digital and our money should be likewise. The current mess we are in is groupthink - simply a colossal operational management failure. Mainstream economists have misunderstood monetary operations for 40 years. Fix our currency management and poor banking structure and everyone's standard of living will increase.<br /><br />Metaphors are helpful but they can quickly get a way from you when a critic is trying to punch holes. in my mind the safe way of explanation is using the right <a href="http://dollarmonopoly.blogspot.com/p/about.html" rel="nofollow">language</a> and stick to talking points. What I'm trying to do is to build a platform of talking points that explain our system clearly and concisely. What we are collectively lacking is confidence and trust in our system.Craig Austinhttps://www.blogger.com/profile/11181507887538340658noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-79861098304745786032011-07-17T17:57:15.964-04:002011-07-17T17:57:15.964-04:00Tom, thanks for your responses. You're being p...Tom, thanks for your responses. You're being patient with me and I think I've failed to make my point. I believe I have a pretty good grasp of the differences between gold standard and fiat currencies and an increasingly good grasp of MMT at-large (I score pretty well on Bill Mitchell's Saturday quizzes). What I wanted to explore is whether there are <i>similarities</i> that address what federal spending actually is, that might be useful in bridging the persuasion gap for those who believe gold standard dollars are "worth" something but that fiat dollars are not, and that spending a gold standard dollar is not inflationary but spending a fiat dollar is. So many folk have the vague notion that rising prices in specific or in general is a result of the federal government "diluting" the money supply but when pressed cannot conceive of a mechanism by which this actually occurs. There is similar ignorance of the fact that federal spending occurs in the private sector, creating jobs and a significant market for useful and desirable goods and services. You know this, of course, and I cite these examples only to illustrate the persuasive difficulties that MMT is hard up against. If my metaphors and analogies are unhelpful, I'll abandon them and try to find something better.Full Employment and Stable Prices Partyhttps://www.blogger.com/profile/04610345356253068630noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-49908521102410328072011-07-17T16:51:13.636-04:002011-07-17T16:51:13.636-04:00FEAOSP, the gold standard is a completely differen...FEAOSP, the gold standard is a completely different monetary system from a fiat system. It is a convertible fixed rate system, while fiat is non-convertible floating rate. <br /><br />Countries that adopt the former give up currency sovereignty in doing so, and they are limited as to what they can do domestically using monetary and fiscal policy, which has to be used to manage reserves wert the rest of the world. <br /><br />In a non-convertible floating rate system, the country retains currency sovereignty and can use its advantages to manage domestic economic policy. The floating rate currency self-adjusts in markets to conditions in the rest of the world. <br /><br />This is a huge difference and a convertible fixed rate system involves high price to pay supposedly to control inflation, i.e., preserve the value of money as a store of wealth.<br /><br />Political restraints do not alter the operational reality of the monetary system in place, they just create conditions that make it difficult or impossible to use some of the advantages of the system, in the case of a fiat system, to impose "fiscal discipline." But it is still a fiat system and functions as such. Even with the political restraints, the US doesn't actually fund itself with taxes or borrow to finance spending, although it is made to look as if it were. <br /><br />Under a convertible fixed rate system like a gold standard, government actually has to tax and borrow to fund itself, or it will encounter reserve issues because reserves are real (gold). This does not apply in a fiat system because reserves are just numbers on spreadsheets.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-34377189539980365822011-07-17T15:29:56.963-04:002011-07-17T15:29:56.963-04:00So is it a useful formulation to say that gold sta...So is it a useful formulation to say that gold standard currency is simply a more restrictive and less useful type of currency than our current system with voluntary constraints like debt ceilings and borrowing equivalence, or than full-on MMT, and not a horse of an entirely different color?<br /><br />Does the notion of the new dollar earning its way into circulation do anything to help dispel the inflation hysteria of the "printing money" crowd?<br /><br />Like Craig Austin, I have a particular interest in the metaphors and semiotics of persuasion required to insert these ideas into the mainstream.Full Employment and Stable Prices Partyhttps://www.blogger.com/profile/04610345356253068630noreply@blogger.com