Warren Mosler on "deposits create reserves"

From comments at The Center of the Universe

Y Reply:
June 25th, 2012 at 10:18 am

Warren,
“the fed allows it’s member banks- it’s designated agents- to ‘create’ reserve balances within the regulatory framework.
This framework includes reserve requirements as well as extensive regulation on what type of loans/assets are allowed and not allowed. So if a bank creates a loan/deposit/reserves it’s done so within the regulatory framework as a agent of government.”

- When you say the fed allows its member banks to ‘create’ reserve balances, do you mean the fed allows member banks to become ‘overdrawn’? Why do you put ‘create’ in speech marks?
Could you clarify specifically what you mean in detail when you say member banks ‘create’ reserve balances?
thanks!

Warren Mosler Reply:
June 25th, 2012 at 10:52 am

Bank deposits are the accounting record of the liability associated with loans.

So when a bank lends you $100 they might at the same time enter the number ’100′ into your checking account.

But the loan didn’t do the entering of the 100 into your account per se. The 100 liability is the accounting record of the loan.

liabilities are accounting records off assets, etc.

When you account for something you don’t exactly ‘create’ it the way the word ‘create’ is generally understood-
making something out of something else, etc.

What I mean by allowing banks to create reserves is that regulation allows banks to make loans and corresponding deposits that it will accept for payment of taxes recognizing that they are allowing that bank to incur a reserve deficiency in the case of reserve requirements. Additionally, when the Fed ‘clears a check’ it’s allowing the possibility of the account debited to be overdrawn which is also the possibility of a loan from the Fed.

Warren Molser on politics and the JG

From a comment at The Center of the Universe:

Warren Mosler Reply:

June 25th, 2012 at 9:23 am

I was the first to show how an employed buffer stock policy was a viable option back in ‘soft currency economics’, and that in the context of our political goals- full employment and price stability- it was my opinion that it was obviously a far superior option vs the current policy of using unemployment as a labor buffer stock, and that the only reason it wasn’t our policy was the usual deficit myths. I still hold that position and I think most who understand MMT do as well.

But to your question, I’d say it’s a fundamental understanding. The term ‘essential component’ itself seems to miss the point of MMT?

This is not about promoting a political ideology. It is about analyzing what’s happening and the ramifications of various policy options.

I don’t tie MMT to a political ideology.

I personally don’t have any use for either political party at this point in time.

Nor do I feel good about any of their candidates.

They are all out of paradigm and as such are part of the problem, rather than part of the answer.

That said, it makes perfect sense for people who understand MMT and have political agenda to formulate policy that’s in paradigm and support it as such.

Occupy Dallas General Assembly proposal to endorses the Mosler Plan after Mosler appearance

Proposal

endorsement of Mosler's 3-point plan

After hearing an explanation of Modern Monetary Theory by Warren Mosler, Occupy Dallas endorses his remedy for our nation's current economic condition: 

1-cut FICA taxes to end this regressive policy and allow greater spending.

2-disbursement of federal funds to states on per-capita basis
 

3-guaranteed "transitional" employment for anyone seeking a job at $8/hr 

We feel these proposals are simple and effective and will serve the interests of the 99% far better than any "austerity" measures being considered by politicians in both major parties.

Good work, Warren!

Fiat Nonsese in an Age of Reasoned Ignorance

Who expected British fraud, US crime, Teutonic discipline, banking, reason, logic and comedy to converge in such unprecedented combinations of fiat nonsense?

Germany's finance minister Wolfgang Schaeuble is rejecting US calls on Europe to move faster in fighting its policy crisis, telling him to get the American deficit under control instead.

You really have to laugh. What's the alternative? Deficit?  Exactly what deficit is he talking about?

Herr Schauble, here's the reality. You really should try some. We have a huge world population which successfully converted - ~80 years ago - to fiat currency systems tied directly to the return on coordinated public initiative. That adjustment made currency bookkeeping serve the adaptive rate of large, rapidly growing economies.

Face it, by 1933, we transitioned from a static-value view of currency, to a dynamic-value paradigm specifically to meet an unmet demand. Dynamic contexts demand that we unleash the quality & tempo of distributed decision-making which large, educated populations are capable of producing.

When you transition fundamental variables or interdependencies in any complex system, the basic function of many tuning and control variables are fundamentally and completely changed. Often even inverted.

What are the quite obvious implications of fiat? Let us start the count. A deficit in fiat is meaningless to policy. Any dry meaning of "deficit" derived from accounting & policy under a static-value gold-std is completely orthogonal to its utility in a dynamic-value fiat-std.  The only implication of a deficit in fiat is it's eventual implications for new interdependencies.  Exceedingly few are talking about the tolerance limits, only the fiat deficit itself.

Let's put this in perspective.

A deficit in shells has implications to a snail.

The same "deficit" is completely irrelevant to army ants.

Why?  Because the army ants have traded the constraints of the shell game in order to pursue the insanely greater return on dynamic coordination, aka, fiat.

Yet here we are, 80 years after scaling up yet another milestone in the same decision process. And what are we doing? We're acting like frat brats, passed out on the curb the day after acing the big test, and then promptly getting so drunk we forgot all we'd learned up to & including the big test. Figuratively, we're retreating into our shell. The misguided actions of Luddite deficit-terrorists keep their nation slimed in a shell, while a fiat world races past and leaves them constrained in the dust. There's no morality, or adaptive strength in that, only crime and treason and, at best, ignorant fraud.

No one could have predicted this? Not per currency operations alone. The foundations of such self fraud lie outside financial operations, and are embedded in parallel institutions, notably public education.

It's a new deal, success. How do we handle it? Do we really just look around, and say "Let's do it again?" If not, how do we correct this mess and move on to even greater things, faster?

If forgetting enough to get ignorant again is the goal, then we're half way to relearning what our grandparents learned and our parents forgot. Face it, that's boring. It's worse than a clown question. It's clowns running the media, pandering to clowns in policy offices .. all applauded by a clown electorate. We can do better.

Retreading stale logic doesn't hold water in dynamic context streams.

USA, Japan, etc: tying ourselves in fiat knots over fiat limits on fiat initiative. Huh?
EMU: pegging fiat to bankster hoarding of fiat. You're kidding?
China: not talking, while party members convert fiat to static assets elsewhere. !
(Good luck with that.)
India: still undecided over casting out Brit banksters by fiat, or inviting them back. (Again, good luch with that.)

All surrounded by Luddites at the WB & IMF saying that there is no alternative! Good luck with that too!

What's the alternative to crawling back in our shell?

There are at least 10 things every 10yr old should know about the role of fiat currency in policy agility and national adaptive rate.

Insist that kids in YOUR neighborhood learn them. Otherwise, you may as well take a nap and forget the future. For your grandchildren, it'll be like you never existed.

Yanis Varoufakis — It All Began With A Strange Email

Garth Brazelton of Reviving Economics says this is fascinating. It is.

Read it at Valve Economics
It All Began With A Strange Email
by Yanis Varoufakis | Professor of Economic Theory at the University of Athens and Visiting Professor at the Lyndon B. Johnson Graduate School of Public Affairs at the University of Texas at Austin, and now Economist-in Residence at Valve.

Steve Waldman does economics and ethics

Good post. This is a subject that needs airing. I would go further into class analysis and the worker-ownership relationship in neoliberal capitalism that makes capital not only the dominant factor but also treats labor on the level of other commodities, as a cost and a means to an end, higher return. The fundamental principle of Western ethics is that human beings are never to be treated as means since they are end in themselves.

Read it at Interfluidity
Stabilizing prices is immoral

by Steve Randy Waldman

Division of labor was pre-Smithian

"Division of labor" was not an invention of Adam Smith.

Read it at INET | History of Economics Playground (very short)
Division of labour was common knowledge by the 1770s
by Benjamin Mitra-Kahn

Bill Moyers interviews Matt Taibbi and Yves Smith

Matt Taibbi and Yves Smith Interview: Moyers & Co.

(26:56)

The tangled web of banks and government with Rolling Stone's Matt Taibbi and Yves Smith of the website Naked CapitalismMatt Taibbi and Yves Smith

Joe Brewer — The REAL reason conservatives always win

Conservatives, you don't need to read this. You are already doing the right thing. Progressives ignore it at your peril.

Progressives are easily kept on the defensive through the age-old strategy of Divide and Conquer

A fantastic overview of group selection can be found in E.O. Wilson’s groundbreaking new book, The Social Conquest of Earth, which builds a powerful argument for how humanity’s social nature enabled us to dominate every ecosystem we have entered in our 2 million year history.*

The argument goes something like this:
1. Throughout history, a tiny number of species have developed a capability known as eusociality — advanced social organization comprised of large numbers of individuals with differentiated roles including members that span more than one generation.
2. Most eusocial species discovered in the fossil record are the social insects — ants, bees, termites, and wasps. Every one of these species has been so successful at thriving that their bodies contained more than half of the biomass in the ecosystems where they lived, meaning that they completely dominated the niches populated by them. This pattern continues up to the present.
3. Humans are the only eusocial species to have the additional properties of strong emotional bonds between group members and advanced cognitive abilities that enable us to form coherent gestalts of meaning — especially the capacity for shared cultural narratives and tribal identities — which have enabled us to out-compete and dominate less socially adept animals in every ecosystem we have entered.
4. The key strategy underlying this pattern is that well-organized groups, which elevate the needs of the whole over those of individuals, are more successful at acquiring resources and consolidating power than those individuals or groups that are less organized.

Sound familiar? In American politics, we see the top-down authoritarian worldview of Conservatives enabling them to fall in line and take marching orders. They form strong loyalty bonds through religious affiliation, old money networks, and various social clubs that give them an immense capacity for social cohesion.

And what about Progressives? We are divided into issue silos, unable to form lasting coalitions that bond us together under the same ideological flag, and easily kept on the defensive through the age-old strategy of Divide and Conquer.

Read it at Energy Bulletin
The REAL reason conservatives always win
by Joe Brewer

Dr.Housing Bubble on how the US command system affects housing

The Federal Reserve has essentially gone Soviet Union on the US housing market. Without a doubt this has caused a mini-boom in the market but is this simply more fumes or something more sustainable? We’ll try to look at current data and try to examine where the market is heading for the rest of 2012.

Read it at Dr. Housing Bubble
The wonderful world of command control US housing – 6 charts highlighting future trends in the housing system. Silent crashing markets, command style housing controls, and Fed top sponsor of maximum leverage.
by Dr. Housing Bubble

I've been complaining about the command system in place at the apex of the economy, with a small groups of unelected, unaccountable, and interested technocrats pulling the levers of monetary policy to micromanage the economy. It's both anti-capitalistic and anti-democratic.

Plus, it doesn't work.

As a commenter recently said, "I'm tempted to say to these very smart people that we're not in a 'liquidity trap,' we're actually in a stupidity trap." Amen.

Note that Dr.Housing Bubble may a good RE analyst, but he doesn't grok monetary economics.

Those that think rising rates would be a sign of inflation or a rising economy need only look at Italy, Spain, and Greece to see if rising rates signal a good economy. No, rates can rise if people lose faith. Fortunately for now, the U.S. is the least ugly girl at the dance so we are able to keep rates ridiculously low. Yet is this a good longer-term strategy? Eventually investors will want their money back (when do we think we’ll pay off that $15+ trillion national debt?).

He doesn't get the difference between nation that is a currency issuer and one that is a currency user, i.e., is borrowing in a currency that it doesn't control. But that doesn't substantially affect his analysis.

UPDATE: See also Mish's Three Key Reasons Housing Not Coming Back: Demographics, Student Debt, No Jobs

BIS warns about moral hazard and threat of second leg down

The Bank for International Settlements said in its annual report that the world economy remains out of balance, with advanced economies struggling with debt and emerging economies growing strongly but facing risks of their own version of boom and bust.

The BIS – an intergovernmental organization of central banks based in Basel, Switzerland – said it's key for governments to make banks take responsibility for their losses and force them to rebuild their finances. Meanwhile, the threat from risky bank behavior is growing again.

"The world is now five years on from the outbreak of the financial crisis, yet the global economy is still unbalanced and seemingly becoming more so as interacting weaknesses continue to amplify each other," the BIS said in its 82nd annual report. 

"The goals of balanced growth, balanced economic policies and a safe financial system still elude us."

Read it at The Huffington Post
Bank For International Settlements Report: Big Banks Take Risks Expecting Taxpayers To Cover Losses
by David Mchugh

Yanis Varoufakis— And the Good Ship Greece Sails On: ‘Letter’ to an italian colleague

A few weeks ago I was approached by Andrea Adriatico, a theatre director from Bologna’s Teatri Di Vita with an interesting request: Could I write a ‘letter’ to some fictional Italian economics professor, outlining on a colleague-to-colleague basis, the Greek ‘situation’ as it is experienced by a Greek economics professor. That letter would then be read out during a play, and be part of the play [entitled Cuore di… Grecia, i.e. Heart of… Greece). Well, I was intrigued and said I would do it. The ‘letter’ I ended up writing follows. The first performance is scheduled toward the end of July…

Read it at Yanis Varoufakis

And the Good Ship Greece Sails On: ‘Letter’ to an italian colleague

by Yanis Varoufakis

(h/t Clonal Antibody via email)

When the artists cooperate and coordinate with the intelligentsia, then events speed up due to the synergistic effects.

Corporatizing the Public University v. Open Source Education

This is a follow-up post by Carter and Links to Teresa Sullivan University Of Virginia Ouster Led By Political Donors Lacking Academic Experience, adding the gory details.


Worth a look if you are into the future of higher education in the US. Appears like corporate America wants to to see public universities compete with for-profit University of Phoenix. Can it be done without degrading standards is the question.


The interesting thing to me is that as education goes this way, it opens the way for informal education to replace it. Why pay for online education when just as good or better is available free? One is just buying a credential, and that's is not a viable strategy. To easy to open source this model to make it profitable over time.


But open source education is already coming anyway.The Kahn Academy is just the first step. More and more children will be home schooled as youngsters and then will take charge of their own education as soon as they are able, which will become younger and younger over time.


Sir Ken Robertson will be pleased. Watch Changing Education Paradigms.

Read it at The Huffington Post
UVA Teresa Sullivan Ouster Reveals Corporate Control Of Public Education
by Zach Carter and Jason Links

beowulf — Coin of Destiny

People are starting to write about the Trillion Dollar Coin again, which can only mean one thing… Tsy is fast approaching the debt ceiling....

I’ll put it to the floor, how do you think the debt ceiling issue will shake out this year?

Read it at Modern Monetary Realism

Coin of Destiny

by beowulf

beowulf sleuths a numistmatic option in addition to the platinum coin

From the comments on the platinum coin:

... there's another way Tsy could mint its way around the debt ceiling. I've read in a coin collector publication that the Mint has long had wide open coinage power ("general numismatic authority") under 31 USC 5111(a)(3) (signed into law October 1973; good 'ol Dick Nixon, Johnny on the spot once again):
"The Secretary of the Treasury— may prepare and distribute numismatic items..." 

Section 5134 defines numismatic item as:
"any medal, proof coin, uncirculated coin, bullion coin, or other coin specifically designated by statute as a numismatic item..."

 That definition is from 1992, but it seems clear that "may prepare and distribute numismatic items" includes the authority to mint coins, which is as they say, the ball game because the legal tender act (section 5103, on the books since at least 1965) says "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender..."

beowulf, June 23, 2012 2:02 AM

Clonal cites the statute:

The links to the Sections pointed out by Carlos (Beowulf) above


31 USC § 5103 - Legal tender


Quote:
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.



31 USC § 5111 - Minting and issuing coins, medals, and numismatic items


Quote:
(1) shall mint and issue coins described in section 5112 of this title in amounts the Secretary decides are necessary to meet the needs of the United States; 
.
.
.
.



(b) The Department of the Treasury has a coinage metal fund and a coinage profit fund. The Secretary may use the coinage metal fund to buy metal to mint coins. The Secretary shall credit the coinage profit fund with the amount by which the nominal value of the coins minted from the metal exceeds the cost of the metal. The Secretary shall charge the coinage profit fund with waste incurred in minting coins and the cost of distributing the coins, including the cost of coin bags and pallets. The Secretary shall deposit in the Treasury as miscellaneous receipts excess amounts in the coinage profit fund. 



Section 5112 I have linked to in my previous post - That is where the Secretary of Treasury has the discretion about the nominal value of the platinum coins. It should also be noted that coins are not covered by the debt ceiling law only paper money is.

Quote:
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

31 USC § 5134 - Numismatic Public Enterprise Fund



Here, the Fed becomes a "coin collector" not much different than collecting stuff that the TBTF banks want to dispose off!
Clonal, June 23, 2012 10:36 AM 

Thank, guys. See what you are missing if you are not reading the comments.


OK, let the legal beagles have at. 

Aristides Hatzis — Back to the 1930s: the hammer, sickle and swastika

Yikes. Aberration, or shades of things to come?


Read it at The Financial Times | Opinion
Back to the 1930s: the hammer, sickle and swastika
By Aristides Hatzis, associate professor of law and economics at the University of Athens

Izabella Kaminska — The exponential growth in solar consumption

Good sign.

Read it at The Financial Times | FT Alphaville
The exponential growth in solar consumption
by Izabella Kaminska
(h/t Naked Capitalism)

Interview of Marc Lavoie by Philip Pilkington — Part II

Must-read, along with Part I.

Read it at Naked Capitalism
New Directions in Monetary Economics: An Interview with Marc Lavoie – Part II
Interview conducted by Philip Pilkington
Posted by Yves Smith

David Bollier on the significance of the idea of the commons

One of my working hypotheses has been that commons discourse has great power because it is able to function as an open platform. It is both general and specific. I frequently compare the commons to DNA because both are under-specified design structures that evolve and adapt in relationship to local circumstances. A certain ambiguity and incompleteness in the language of the commons is precisely what enables people to infuse it with their own specific values, needs and aspirations. And this is what makes the commons both universally appealing and particular in its manifestations.

The Buffalo Commons: The Social Life of a Metaphor

by David Bollier — news and perspectives on the commons

While Bollier's post on the buffalo commons is interesting, the only paragraph that I think is a must-read is the first, quoted above, especially in relation to what Roger Erickson has been saying.

Anyone Still Denying Control Fraud?

This example should disabuse you of the notion that Control Fraud hasn't returned, and grown.

Jury convicts Ind. financier in $200M fraud scheme

An Indianapolis businessman accused of looting an Ohio-based finance company after buying it and bilking about 5,000 mostly elderly investors out of more than $200 million was convicted Wednesday on all counts.

A federal jury found Tim Durham guilty of securities fraud, conspiracy and 10 counts of wire fraud. His business partners, James F. Cochran and accountant Rick D. Snow, also were convicted of conspiracy and securities fraud, and some wire fraud counts. When sentenced, the men could face decades in prison.



Durham’s defense attorney had argued that the men simply made bad business decisions in the midst of the bewildering economic crisis of 2008.

*****

Wasn't that Cheney's defense? "No one could have predicted this."

It's one thing for MMT to sound so implausible to those already indoctrinated. Yet how do we explain the unwillingness of our electorate to believe that those they profess to admire are robbing the electorate & stealing from the vulnerable?

Bill Black's 4 Rules for Control Frauds should also be familiar to every highschool student, but instead they're usually till taken as a POSITIVE by naive voters and ignorant or corrupt politicians.

1. Grow massively, 

2. By making very poor quality loans at high rates of interest, 

3. Use extreme leverage (high corporate debt), and 

4. Set aside virtually no loss reserves for the massive losses that will be coming. 

If you do these four things, you are mathematically guaranteed to report record short-term income. Akerlof and Romer referred to it as a sure thing - it is guaranteed.

CEOs just have to trigger their golden parachutes and safely leave, before the company implodes.

What do we have to do to get our current electorate to wise up?

ps:  Follow what the actual prison terms are.  They could still get off, file appeals, or even receive pardons.  In the state of Maryland, Judges can even reset sentences, after "considering" further input from those convicted, or their lawyers.

Who are the real job creators? (Guest Post)

This is a guest post by Jonathan Krajack. Jon told me he learned a lot about economics and MMT by reading this blog and he wanted to make a contribution. I was very happy to post this up. -Mike Norman
 
Who Are the Real Job Creators
by Jonathan Krajack

We often hear in the news and from our elected representatives that we need to lower taxes on the job creators, and in so doing, jobs will be created and the unemployment rate will fall. While this is true, it is widely misunderstood. The myth is that wealthy people are the job creators. This is misleading at best, and outright class warfare against the not-wealthy at worst.

In a market economy, where people exchange money for goods and services, it is consumers that are the “real” job creators.

Consumption is the force that drives a market economy. If people were to stop spending money, the economy would come to a screeching halt. Imagine for a moment that everyone decided to stop spending money for… a week? a month? etc. What would happen to jobs?

At first, we would see businesses begin to lay off workers in order to cut costs and stay afloat. As the spending freeze continued, many businesses would 'go out of business.' The longer the spending freeze persisted, the closer we would get to a Great Depression, or worse. After all, how are businesses going to pay workers if the businesses are not receiving income from sales?

The scenario I just described is an extreme version of what we’re actually seeing today. It’s not that no one is spending. The problem is that everyone is not spending enough. It raises an important question: how is this related to businesses deciding whether or not to hire more employees?
Well, why do businesses hire employees?

Businesses hire employees for two main reasons: 1) more are needed to successfully meet current sales, and/or 2) more are needed to meet an expected future increase in sales.
Do you see the connection? Business is all about sales. So, how do we increase sales (broadly throughout the economy)?

It’s simple: consumers need more money to spend!

There are various ways to change the amount of money in the hands of consumers, but the two primary mechanisms are federal taxes and federal government spending. Lowering federal taxes and increasing federal government spending translates to more money circulating throughout the economy. Likewise, increasing federal taxes and lowering federal government spending translates to less money circulating throughout the economy.

Therefore, the U.S. government ought to be LOWERING taxes and/or INCREASING government spending.

Lowering taxes is fairly simple: who is getting the tax cut and how much are they getting? Government spending is a little more complicated. The U.S. government could just cut everyone a check. This would be exactly like a tax cut. But the U.S. government can also make purchases with it's spending, be that on healthcare, infrastructure, missiles, etc. All else equal, each option has the same “net effect” on money in circulation.

But for the purpose of increasing consumption broadly throughout the economy, the important question is: who gets the money? And it is here that we come full circle…

Most people are not wealthy. Wealthy people do not need more money. By definition, they already have a lot of it. Giving them more money will do very little to increase consumption broadly throughout the economy. Therefore, lowering taxes on the wealthy will do very little to stimulate the economy and decrease unemployment.

In order to stimulate the economy and decrease unemployment, we need to get more money in the hands of the “real” job creators: the not-wealthy. It is the masses of not-wealthy people that drive the economy. They are the soil in which new and existing businesses blossom.

(Well done, Jon!)

Corrente — Platinum coin enters the main stream

Matthew Yglesiasis promoting the idea and Atriosis pointing to it.

 Apparently, neither Letsgetitdone [Joe Firestone] nor Corrente is to have any credit, but at least the idea is getting out there.

Not to mention beowulf (aka Carlos Mucha), whose idea it originally was. As is recognized in the comments there.

Scott Fullwiler was the first economist to promote it publicly afterwards, and to my knowledge is still the only one to do so.

Read it at Corrente
Platinum coin enters the main stream
by coin seigniorage
(h/t Kevin Fathi via email)

Benchmarking macroeconomic theory against reality

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it. Anyway, this is what I wrote today which was highly constrained by meetings and travel for much of the day.

Read it at Bill Mitchell — billy blog
Benchmarking macroeconomic theory against reality
by Bill Mitchell

Any macroeconomic theory should help us understand the real world and provide explanations of historical events and reasonable forward-looking outlooks as to what might happen as a consequence of known events – for example, changes in policy settings. A theory doesn’t stand or fall on its absolute predictive accuracy because it is recognised that forecasting errors are a typical outcome of trying to make predictions about the unknown future.

However, systematic forecast errors (that is, continually failing to predict the direction of the economy) and catastrophic oversights (for example, the failure to predict the 2008 Global Financial Crisis) are an indication that a macroeconomic theory is seriously deficient.

Republicans lead the poorest states

Here's a breakdown of per capita income in the 50 states. National per capita income is $42,070.

As you can see the majority of the states below the national average have two Republican senators (red line). A purple line means one Republican and one Democrat and a blue line means two Democratic senators. The wealthier states are Democratic.

What about governors?

Well, in the 25 states with per capita income above the national average, 12 (48%) of those states had Republican governors.

However, when you look at the 25 states below the national average, 18 (72%) had Republicans.

Great Rebuttal to McConnell’s War of Misinformation on Open Government

A war is being waged against the DISCLOSE Act. Its Commander in Chief is Senator Mitch McConnell, his secret weapon is misinformation and his goal is to protect unlimited dark money contributions to the political process.

How can a growing democracy continue making a more perfect union ... without public awareness?

Does McConnell want a dictatorship? Is that his definition of success?

Here are the myths that McConnell wants.

Myth: Laws Requiring Disclosure Are Unconstitutional

Myth: Disclosure Chills Speech

Myth: Disclosure Limits Freedom of Association

Myth: The DISCLOSE Act Singles Out Unions for Favorable Treatment

Myth: Independent Expenditures Don’t Corrupt the Process

Myth: Current Law Provides Sufficient Disclosure


And finally, here's what McConnell does NOT want discussed.

Fact: Disclosure is a Constitutionally Protected Way to Address Corruption in the Political Process

Is McConnell related to Benedict Arnold?  Just in it for himself, and willing to say anything for an adequate payment.

Can't See the Situation for the Money

While we're limiting currency supply - by foolishly trying to hoard it, and to stabilize the "buying power" of a dynamic asset - we continue to spawn both more people AND more options.

Oxymoron:  noun;  e.g., stabilizing fiat.  Might as well stabilize evolution or thermodynamics, or quantum mechanics for that matter.

Our prime failure involves failing at situational awareness.

Our Output Gap is growing by leaps & bounds. Warren Mosler's phrase describing our current conditions, "Good for stocks & bad for people" mentions a dynamic that cannot be actually tracked with currency.

It's not just failure to understand currency operations that is troubling us.

We're also failing to understand the role of monetary policy subservient to national policy, which Warren typically calls Public Purpose.

Marriner Eccles described this vividly, back in 1932.

"We shall either adopt a plan which will meet this situation under capitalism, or a plan will be adopted for us which will operate without capitalism."

".. what can be done under communism or socialism, can be done under capitalism in the United States, if we have sense enough to set up an adequate flow of currency and credit in the right channels."

"YOU have got to take care of the unemployed or you are going to have revolution in this country."

"When you get enough unemployed they will control the Government and change our present political, social, and economic system."

How close we get to that sort of revolution is a social metric that CANNOT be accurately measured via currency, stocks or by bankers & financiers, either at the ECB or on Wall St.

We cannot peg all other policy to monetary policy. If we try, a time will come when the bankers will be the last to know that they're being swept away by a revolution. Then, the situation will quite suddenly be bad for both stocks and people, before we return to putting our own people before stocks.

There is a better way.  It only requires a more informed policy staff, appointed by a better informed electorate.   Does no one read in this country any more?  Why isn't the following common knowledge for every highschool sophomore?

'"Our leadership has delayed far too long in attempting to deal intelligently with our problems, which can be met only by the bold and courageous [and coordinated] action of .. our entire people."

"[We] can mobilize the resources of the Nation for the benefit of its people. "

"Unless the Government soon recognizes its position as the only stabilizer of our economic system and acts accordingly, unemployment relief required is due to Government failure to act sooner."

"Is there any program of economy and Budget balancing on the partof our Government as important as to stop this great loss and all theattendant human suffering, devastation, and destruction?"

"We have a complete economic plant able to supply a superabundance of not only all of the necessities of our people, but the comforts and luxuries as well. Our problem, then, becomes one purely of distribution. This can only be brought about by providing purchasing power sufficiently adequate to enable the people to obtain the consumption goods which we, as a nation, are able to produce. The economic system can serve no other purpose and expect to survive."

"The nineteenth century economics will no longer serve our purpose - an economic age 150 years old has come to an end. The orthodox capitalistic system of uncontrolled individualism, with its free competition, will no longer serve our purpose."

"I can conceive of no greater waste than the waste of reducing our national income about half of what it was. I can not conceive of any waste as great as tha t. Labor, after all, is our only source of wealth."

The real story on government debt...

Please see the graph below that shows the breakdown of central government debt of 10 countries as a percentage of GDP. In the case of the United States, the figure used was debt held by the public. Intragovernmental debt (the debt the government owes to itself) was not included for obvious reasons. (It's ridiculous.)

So where are we, debt-wise? Pretty far down on the list.

Who has the highest debt-to-GDP ratio? Japan. They also have the lowest interest rates and just so you know...it's not because they "save" more or any other crap like that. It's because the Bank of Japan keeps their rates ultra-low in the belief that it will help the economy, which hasn't been the case for nearly 20 years. (They still don't get it.)

Cease, Forever, the Practice of Calling Fiat Currency Creation a Deficit.

It's currency creation that denominates any economic growth.

In another investors interview, Warren Mosler once again explains monetary operations beautifully. Pity his audience remains so small.

Early in the interview, Warren makes an overlooked point very succinctly.

Altering his phrase slightly, I'll put it this way:

It's "deficit" spending that supports any economic growth.

Please, let's all commit to saying that in a different format. See below.

Why is it that such a simple point is not universally recognized? We can put a man on the moon, but we can't understand something as simple as a fiat currency system?

Whatever new activities we the people are capable of creating, we're free to do. Then, we're free to record and adjust to our created growth by creating fiat bookkeeping.

What is fiat bookkeeping? Fiat currency.

No population can generate more people + more activity without creating more currency to denominate the newly created & highly organized transaction chains. That couldn't be more simple, or more clear.

JIT supply chains, logistics & economies are not possible without JIT creation of bookkeeping currency. We can't run out of RFID chips unless we choose to, nor can we run out of fiat currency ... unless we choose to limit our own capabilities.

So, we're back to semantics. Why is currency creation called "deficit" or "debt," when that use conflicts profoundly with other applications of those words?  Do we get fiat from somewhere else?  Can we run out of fiat?  Do we owe fiat to someone?  No, no & no.

It's the semantics that are our stumbling point, not static vs dynamic operations.

Cease, forever, the practice of calling fiat currency creation a deficit, or a debt.
We can't ease the cognitive tensions over this as long as we keep calling currency creation a deficit.

It's fiat currency creation that allows more transaction-chains to be denominated upon demand, thereby unleashing exploration of any & all options we can imagine.

If an aggregate can do something, and benefit from it, what on earth is the problem with recording the transactions involved, so everyone can adjust accordingly?

As individuals from John Law to Warren Mosler keep hinting, fiat currency supply is just another automatic stabilizer for an organized aggregate.

Please, let's all just say so, more bluntly, more often.

It's currency creation that denominates any economic growth.

Deena Stryker — Why Iceland Should Be in the News, But Is Not

Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.

That’s why it is not in the news anymore.

Read it at Truthout

Why Iceland Should Be in the News, But Is Not
Saturday, 26 November 2011 06:08
By Deena Stryker, The South Africa Civil Society Information Service | News Analysis

(h/t Gillian Swanson via Ralph Musgrave)

One story of the crisis that has a happy ending — and carries an encouraging lesson about standing up to power.

Humor

Shared by Occupy Together on FB