Peter Cooper — A Simple Modern Money Tale – Buckwell Island Establishes a Currency

Pass it on.

heteconomist
A Simple Modern Money Tale – Buckwell Island Establishes a Currency
Peter Cooper

Ellis Winningham — The Bond Market Doesn’t Control Anything; the Currency-Issuing National Government Does

More myth debunking.

Ellis Winningham — MMT and Modern Macroeconomics
The Bond Market Doesn’t Control Anything; the Currency-Issuing National Government Does
Ellis Winningham

Peter Cooper — If it’s Doable, it’s Affordable

Modern Monetary Theory (MMT) continues to make inroads into the mainstream discourse with the appearance of an article by Youssef El-Gingihy in The Independent Online. The article features MMT in connection with the new book by Bill Mitchell and Thomas Fazi, Reclaiming the State. At its recent rate of dissemination, MMT may transition from heterodox to mainstream ahead of expectations.

Although the finer points of MMT can get quite involved, the most basic takeaway is very simple. For societies with currency-issuing governments:
If something can be done, it is “affordable”.

If we have access to the raw materials, the labor power, the skills, the equipment and the facilities needed to produce something, then we can afford to produce it. The cost of doing so is not financial. The cost is a real cost: the exertion of human effort and know-how, the wear and tear on facilities and equipment, and the depletion of natural resources.

On one level, it is bizarre that this basic takeaway of MMT is not already mainstream. If the idea is heterodox, it is only because we are currently living in a very topsy-turvy world, in which up is presented to us as down, black as white, with everything reversed. In reality, it should be much harder to believe the opposite: that what we are capable of is impossible.

heteconomist

If it’s Doable, it’s Affordable

Peter Cooper

J. D. Alt — Wouldn’t it be great if America had a fiat-money

The title is snark, of course.

The only difference between the money system we’ve imagined and the one we are actually using is the terminology we apply to it. We call the government’s particular fiat-money “U.S. dollars.” We call the “Citizen’s Net Gain” our federal budget “deficit.” We call the savings accounts the government makes available to citizens and businesses “Treasury bonds”—and we imagine the government is “borrowing” the dollars being deposited in them. Finally, we call the amount of fiat-money that has been sequestered in the Treasury bond savings accounts our “national debt.” Other than these minor differences in terminology, our American money system is exactly the fiat-money we’ve just imagined....

New Economic Perspectives
Wouldn’t it be great if America had a fiat-money 

J. D. Alt

Warren Mosler — Greece after math

After you do the maths it still doesn’t add up.

It can’t add up.

Ever.

Given today’s institutional structures- pension funds, insurance reserves, etc.- that include massive, tax advantaged, demand leakages where private sector credit expansion is bound to periodically fall short full employment levels. And with the private sector necessarily pro cyclical, counter cyclical fiscal adjustments are, for all practical purposes, entirely in the realm of the issuer of the currency- the ECB, and not the users of the currency- the euro member nations.

In other words, as previously discussed, the maths can’t add up without the ECB, directly or indirectly, writing the check.

And that includes the banking system, which, to serve public purpose, requires credible deposit insurance, again meaning support from the issuer of the currency.

Read it at The Center of the Universe
Greece after math
by Warren Mosler

Bill Mitchell — We do have a choice – we just need to identify it

Bill Mitchell has a good summary of how a modern monetary system works in general terms, hence the analogy of government as a big firm or household is false. It begins here:

The statement “recharging the fiscal batteries” which is sometimes expressed in terms of “building a war chest, or in negative terms as “running out of bullets” etc is commonplace in the public debate.

I hear expressions such as these used every day by politicians, commentators, academics, and citizens.

It is a demonstration of how ill-informed the public debate really is and why when it comes to exercising our obvious choices those choices do not seem to be so obvious to most of us.

It is a total fallacy to suggest that the government has some stockpile of “spending capacity” that it has to recharge and buildup just in case it needs to “turn the lights on” in the future.

 The fundamental principles that arise in a fiat monetary system are as follows:

Read it at Bill Mitchell — billy blog
We do have a choice – we just need to identify it
by Bill Mitchell

This is the basis of MMT as a general theory of modern money.

Warren Mosler — Issuers v. users of a currency

Issuers v. users of a currency

Interview with The Norwich Bulletin, Oct 6, 2010

John Carney — Is Kyle Bass Wrong on the Japan Trade?

John bounces off Joe Weisenthal at Business Insider to explain why Bass has it all wrong, as Mike Norman pointed out here recently on the same reasoning.

Read it at CNBC NetNet
Is Kyle Bass Wrong on the Japan Trade?
by John Carney | Senior Editor

Paul Krugman at FDL on currency issuer and currency users

jessefrederik May 19th, 2012 at 2:23 pm
31


Mr Krugman
How much does the currency user/currency issuer distinction matter? Will the bond markets ever turn on Japan/US/UK?

Paul Krugman May 19th, 2012 at 2:32 pm
45
In response to jessefrederik @ 31




For those not clued in, all of the debt crisis countries right now are either countries that gave up their own currencies for the euro, or borrowed heavily in someone else’s currency (Hungary). Countries that issue their own currency and borrow in it, like us, the British, and the Japanese are able to borrow at very low rates even when, like Japan, they have high debt levels.




So can they (and we) ever have a debt crisis? I think so, but it takes much higher levels of debt than even the Japanese have. People have to believe that there’s no way they can service the debt without printing lots of money, even once the economy has recovered.




The closest parallel I’ve been able to come up with (too deep in the weeds, but I can’t help myself) is France after World War I, which had its own currency but a basically impossible level of debt. Even so, the consequences weren’t catastrophic: a sharp drop in the franc, a brief bout of inflation that reduced the real value of the debt, and a return to stability.




The important point for now is that America is nothing, nothing like Greece — that is, unless the austerians push us into a full-on depression out of misplaced fear that we’re going to turn into Greece …


(h/t jessefrederik in the comments)

No forced insolvency, only operational constraint is inflation.

NYC Mayor Bloomberg: Highly-indebted U.S. could go the way of Europe By Joan Gralla

If the mayor believes this, he is stupid. All one needs to do is look up the definition of "fiat currency" in any dictionary. If he is being disingenuous and trying to manipulate public opinion, he is a liar.

Read it at Reuters
NYC Mayor Bloomberg: Highly-indebted U.S. could go the way of Europe
By Joan Gralla

(h/t Ryan Harris in the comments)

Joe Firestone — The Insanity Isn't the Deficit Spending; It's Claiming That the Gov's Budget Is Like A Household's

Read it at Daily Kos | Money and Public Purpose
The Insanity Isn't the Deficit Spending; It's Claiming That the Gov's Budget Is Like A Household's

by Joe (Letsgetitdone) Firestone

Repeat after me: The issuer of a sovereign currency is not a currency user and does not have to fund itself from revenue or borrow to finance itself, unlike currency users that must obtain the currency ultimately from the issuer as the sole provider.

Randy Wray — Does Chairman Bernanke Know Squat About Money?

I think the biggest policy failures in Washington over the past three or four decades are caused by confusion over the nature of money, and more specifically, the nature of a sovereign currency. So many of our policy makers simply do not understand that a sovereign issuer of the currency is not like a household user of the currency. For a sovereign issuer, there is never a solvency constraint. And a sovereign issuer spends by issuing its currency—not by borrowing it.

Read it at Economonitor | Great Leap Forward
DOES CHAIRMAN BERNANKE KNOW SQUAT ABOUT MONEY?
by L. Randall Wray