MMT Explained to Mums

By Paolo Rossi Barnard

Intro.

The post that follows poses as an example of how the huge complexities of MMT and its political and historical contexts could be divulged to the ordinary folks out there. We named it “MMT explained to mums”, precisely for that reason. This effort is of no small importance, since we at NEP recognize that without a growing popular support for our vision of how economies should be run, we may never gather enough steam to push MMT through the barriers of Power Politics. The actual writer of this post is Italian journalist and MMT supporter Paolo Rossi Barnard. Of course this is not definitive, and we invite both our bloggers and our readers to make comments and contributions to this essential communication effort. We all know that millions of people and families out there are needlessly suffering right now for the insanity of the present economic dogmas. They must be told that there is a life saving, job saving, even nation saving alternative to the present system; it’s called MMT and it’s authoritative, but it’s being denied to them by a tiny elite of power brokers. Ordinary folks must at least know this, because, as Noam Chomsky once remarked, “When people know of injustice, sooner or later they organize to stop it. They always did.”

MMT Explained to Mums

This could change your welfare and your kids’ like nothing before. It concerns what government could have really done for you with jobs, housing, income, schooling, health. It tells you why it never did, and how you could turn things around. It’s tremendously important today for all of us, the ordinary folks.
We are not wasting your time with ludicrous theories. What follows is authoritative, it was born of high academic research. We made it simple for you to read.

One more thing: we are not politicians, we are neither the Left nor the Right. We just believe that folks should be told what’s really wrong with the economy, which means their livelihood. Truth works with the American people.

Ask yourself: What’s the government for?

The obvious answer is to run the country, ok. Anything else? Yes, government should be there first and foremost to look after its people as youths, then workers and then seniors by providing good schooling, good jobs and good welfare whenever people lack them for any reason.This is what government ought to really be about.

Does the government do it?

No. We still have rampant unemployment, underemployment, poor health care for millions and lack of good education for scores of kids and many other ills.
Could the government do it? Can it afford it?

Yes, easily, we’ll explain why.

So, why has the government never done it?

Because private corporations, big banks and the extremely wealthy knew that if government used its monetary powers (the US dollar) to look after us, the people, they would have lost. Lost what? The bigger slice of national wealth with its privileges, and also millions of insecure workers as cheap labor for their profits. Finally, they would have lost control over politics. So they organized a web of lobbies, big media, and above all a host of economic ideas that took over government and stopped it from spending for us. This way they increased their slice of the pie, but they also prevented the pie from growing, kind of they killed the goose that lays the golden eggs, and so the general US wealth pie in the end got even smaller. It’s been happening for the last 40 years. This is no conspiracy, it’s simply the reality of Power Politics in America and elsewhere, too. We are saying to you: unemployment and lack of welfare need not have existed at all in modern America. They were used as a policy tool to prevent citizens from controlling too large a share of the national wealth and political power with the help of their government. Just think: if the majority of us are stuck in a life-long struggle for subsistence, we can’t even begin to think of ruling or controlling anything. We become class B citizens, we don’t count. We don’t count at all. Do you understand now why the powerful always told us that Big Government is bad? Sure, it’s bad for them.

Here’s what government could have done instead, what it could still do.

First, the government could employ at a living salary every single American out of work, and all those working on minimum wages. It has all the money in the world to do so, because our government owns the US dollar and it can pay any wage anywhere it wants to (simple explanation below). You may ask: wouldn’t this add to big national debt? No, not at all, simply because a larger and better paid American workforce would create a lot of new production, new infrastructure, new investment and new services, that is, more American wealth in its pockets and into the government’s coffers. It’s a government expenditure that would end up largely paying for itself and benefiting all. No need for panic about big debt.

Second, government could pay for adequate welfare for all Americans, that is to say universal health coverage, good schooling, social care for the needy and the elderly, and good pension schemes. Again, there would be no big debt in D.C., because it would again make us all better workers, better students, less needy seniors. In a nutshell: we would be an even more competitive nation that creates wealth instead of wasting it on immense social problems. And a society where a sense of common security substitutes pain and fear, which means less social ills, less family disintegration, less crime.

Sounds good, right? But does the government really have all these dollars to spend on us?

A very simple answer. Ask yourself: who gives the US government its dollars? Is it us? Can we citizens print dollars? No. Can businesses print dollars? No. Can banks print dollars? No. Citizens, businesses and banks can only use already existing dollars. Don’t be fooled: when you read of a business having made a fortune, all that’s happened in reality is that a mass of already existing dollars has simply shifted from lots of places or pockets into that business’ coffers. In some cases new dollars are created by private people, but they are always offset by some sort of equally private debt somewhere, so again no net money has come into existence. And when our government sells its bonds and someone buys them, the same applies: already existing dollars move from one place to another. So, who is it that creates new net dollars then? Only our government can. It does it at the Treasury and at the Fed. Think of it this way: government creates dollars by putting its signatures to pieces of paper (notes/bonds) or to electronic money transfers. Can it ever run out of its own signatures? Does it need to borrow them from someone else? Does it need to tax people to get back those signatures that it can just create? No, of course not. So to recap: government creates US dollars anew, never has to borrow them, cannot run out of them, doesn’t need to tax anyone to get them. And so it can use its dollars to do anything it wants, like employ all of us, educate all of us, treat all of us, look after all of us. And don’t forget: this form of government expense ends up largely paying for itself, because of the virtuous circle of new net national wealth it creates. And this requires no super taxes at all. Actually, it all works precisely in this way if the government gives us more dollars than it takes away through taxation. It also beats inflation thanks to all the new things that will be produced and as long as the government stops increasing its spending (plus dollar creation) as we get full employment.

So, you may ask: then what’s all this frenzy about national debt and the deficit?

Debt and deficits are the normal way to run an economy, they have always existed in American history and have never made us broke. Panic about them is largely a ploy concocted by the corporate elites, their economists and their big media. Remember: they had to prevent government and its citizens from acquiring too large a slice of the national wealth. So, among other things, they worked out a brilliant catch phrase: the government’s budget works just like your family’s, so to be ok the government has to earn more than it spends and never spend more than it earns. They said that just as your family debt is bad news, so is government’s. They turned this into mainstream economics through their people sitting as professors in all major universities and often as government top advisers. Sounds reasonable, right? Yes it does, so much so that we all fell for it and the government started worrying so much about debt and the deficit that it stopped the deficit spending that would have made us all live better. And the consequences were disastrous. But wait: do you remember that government creates its own dollars at will? Can any family in America do that? Of course not, period. So how can government and families have the same budget rules? Your family debt has to be repaid by you finding dollars somewhere else, usually through hard work. You don’t grow greenbacks in your garden. And if you fail to find them then you are in big trouble. So yes, you ought to be very careful about debts and deficits. None of this ever applies to the government, because as we said to get dollars it has to turn only to ITSELF and creates them out of thin air at the Treasury and the Fed. Think: if you could just create the dollars you need to pay back your debts, would you ever worry about debts and deficits? Ok, you got it. That’s precisely why all this frenzy about US government debt and deficit is just a plain lie, concocted by the corporate elite to achieve their goals. And look: the richest America we have ever known, that is, the American Dream emerging from World War II, had massive deficits and yet we became a world Super Power that spilled its wealth all over Europe as well. So much for this deficit hysteria. In fact it has been created to allow the conservatives to eliminate those social programs that benefit average Americans. You must understand that this is not a Republican vs Democrat issue – both sides have teamed up to cut programs that help you in order to favor their fat cat Wall Street friends, who think they’ll be better off if you are poorer and unemployed.

In conlcusion.

Do you realize what you have just read? Yes, unemployment and underemployment need not exist in our country. Yes, universal welfare is possible. And yes, all this would come out of government deficit spending with no problem whatsoever. Actually, in the long run it would even make America richer. Think of all the suffering that the present system creates instead, today spreading to millions of decent families all over the country. And what for? Just to ensure that some tiny super wealthy elite could control the majority of our common wealth. Outrageous.

Here’s what you can do to claim back what ought to be yours. Anyone can.

First, we can provide simple to understand primers to further explain to you why the above is truly possible, and we’ll give you all the authoritative academic sources for it in case you want them. Then the immediate thing for you to do is to challenge your Representative with a simple letter and/or email to tell him/her “My family and I are for Full Employment, Price Stability and for Good Deficits for the people, as proposed by senior economists here (NEP url). Do discuss them in Congress, it’s vital for us ordinary Americans. Otherwise you can forget our vote”.

So to recap: Americans and American families were made to suffer needlessly for decades out of greed of the few and out of ignorance of politicians, and things are getting worse by the day. It’s time to stop them. Let’s get the government to do its proper job.

41 Responses to MMT Explained to Mums

  1. I am sorry. No.Far too patronising.

  2. The logic here confuses me. Nothing comes for free, if you print more dollar bills you don't magically create more wealth all you create is more dollar bills. So each dollar bill now represents a smaller share of the wealth. This almost seems like an obscure form of taxation.There's $100 in the world, then I print another $10, now there's $110 in the world. But all the dollars are now worth less, what one dollar buys after the printing only cost $0.91 before. So collectively the people with those original hundred dollars have lost $9(in pre-printing terms). And that's what my new $10 is worth. It's an obscure way of transferring wealth from them to me. But is has the side effect of changing the buying power of $1. Which is a text book definition of inflation.

  3. This essentially seems to be a proposal to print our way out of the situation. Historically there are quite a few instances where that hasn't worked out very well and a fair number where things have gone spectacularly badly. In what way is what you are proposing different from those previous attempts?

  4. There are quite a few controls available that address your inflation concerns – the most obvious is probably not issuing money in a inflationary situation. I personally would prefer a bit of inflation.BTW: I have a problem with the replacement of the word "dummies" for "mums" in this post. Some mums are not stupid en some mums are even really good at economics.Bloody Berlusconic Italians.

  5. Tolomea;Thank you for noticing a weakness in the argument, but the argument is still valid. The weakness is the article's lack of emphasis on everyone's automatic objection to deficit spending – i.e. the danger of inflation. The whole monetarist enterprise only gained traction in the 70s because liberal economists were unable to explain or control the price increases. So let's go there.Here's the relevant text from the aricle:"And don't forget: this form of government expense ends up largely paying for itself, because of the virtuous circle of new net national wealth it creates. And this requires no super taxes at all. Actually, it all works precisely in this way if the government gives us more dollars than it takes away through taxation. It also beats inflation thanks to all the new things that will be produced and as long as the government stops increasing its spending (plus dollar creation) as we get full employment."The thrust of this is correct – deficit spending is only inflationary if the economy is operating at its full capacity and at full employment. If it isn't, the private sector responds to the government's spending by increasing production of the good or service the government wants to buy. Think of a government program to give kids one free Tootsie Roll each week. The Tootsie Roll factory doesn't care who wants to buy more Tootsie Rolls. It just adds on shifts and makes more Tootsie Rolls. The workers' wages ripple out into the economy to pay for shoes, electricity, schools supplies, etc., increasing growth at every turn.Eventually a kid eating a free government Tootsie Roll passes on the purchase of a Milky Way and the circle closes. An increase in aggregate demand has been matched to an increase in goods available for consumption. There is no candy shortage, no reason for the market to ration candy with a price increase and no inflation. The Milky Way producer isn't a loser either – in a growing economy, opportunities for discretionary candy consumption will only tend to increase.Now. If the economy is operating at full capacity and full employment, this logic fails. If the government *competes* with the private sector for resources that are scarce, including labor resources, that really does drive up their price/wage and cause inflation. But the U.S., today, is operating at about 80% of capacity with 20 million unemployed or under-employed. We could run an extra trillion dollars' worth of deficit before we saw the first real danger of excess inflation.Again, thanks.

  6. I find this both confusing and unconvincing. It certainly wouldn't work on my American mum, or many other American mums.Randall Wray's important book on MMT was about full employment and price stability. But this piece seems to run with the dumbed-down free lunch version of MMT that ignores price stability.

  7. MMT has never been about economics. It has always been about social engineering, creating the ideal world according to some disenchanted academics. The only way that the little guy wins is with a free market. The free market society allows for choice. That's why it's called free. Maybe one day America will adopt free market capitalism.

  8. BTW: I have a problem with the replacement of the word "dummies" for "mums" in this post. Some mums are not stupid en some mums are even really good at economics.@Anonymous Paolo is aiming it at Mums based on a comment that I made stating that Mums are not stupid they just don't speak/read in Economic terms and phrases, They do in-fact read papers, magazines, and books. My point which Paolo has taken on board is to write the way us non economists read.

  9. Dan;Thank you for also pointing out the same important flaw in this presentation that Tolomea commented on. I completely agree that the discussion of inflation is much too cursory and needs improvement. But I hope every friend of MMT will recognize the importance of this effort and support the authors' ongoing attempts to produce a brief, and more voter-friendly, summation of the theory.Unfortunately, this particular version has a tone and approach that will jangle the nerves of a large percentage of American readers. Italians and other Europeans may still reflexively believe that the essential purpose of government is "good welfare", but most of my own benighted countrymen – and women – will think of this as, at best, an oxymoron. For many others, the word "abomination" is more likely to cross their minds. In America, "welfare" is a code word for a government program to pay unwed minority women and girls to breed future generations of drug dealers and other criminals while living in rent-free high-rise urban slums from the windows of which they all, in unison, hurl their garbage. We need to say this in a very different way. Americans don't want the federal government to "look after" them. They want – or think they want – just the opposite. They want the government to leave them alone. Not really, of course. They don't want any cuts to Medicare, Medicaid, Social Security or programs to pay for their kids' college. They have been sold the illusion that, in addition to these things, there is a vast bureaucracy at work looking for ways to waste enormous amounts of public money on completely ridiculous projects. An experiment looking for a cure for malaria might be discovered to be using beer as an inexpensive breeding medium (this is a real example). The right-wing propaganda machine re-purposes this with the headline "Feds Spend Millions Buying Beer for Mosquitoes".Speaking of which, we can say this isn't Left or Right, but we shouldn't, because everyone knows that it is. What we should say is that it isn't radical, which is true. We could start by reminding people that these policies were followed during the Eisenhower and Nixon administrations, and not just those of LBJ or FDR.Gotta run. Keep up the good work.

  10. "Ask yourself: What's the government for? The obvious answer is to run the country, ok. Anything else? Yes, government should be there first and foremost to look after its people as youths, then workers and then seniors by providing good schooling, good jobs and good welfare whenever people lack them for any reason.This is what government ought to really be about."Americanized version:Ask yourself: after ensuring public safety, what should the government's highest priority be? Bailing out bankers, hedge-fund managers and other billionaires? Or making sure that the economy works for everyone? Today, almost everyone agrees that Washington is broken – that the current version of Big Government is failing to solve our economic problems or put Americans back to work. It is failing to improve the education of our kids, or improve the performance of the health care system. It is failing to make a clear commitment to all Americans that their retirement years will be decent and dignified. Were things always like this? No. There was a time, not so long ago, when the middle class grew and prospered in America. It was a time when Big Government really was on the side of the little guy. Social Security, Medicare and Medicaid were all invented and strengthened in those years – not threatened or undermined. And there was a bi-partisan consensus that the government should make full employment and low inflation equal and co-dependent priorities. And isn't this still what we really want our government to be about?

  11. Sei tornato! grande Paolo!Purtroppo in Italia il 90% sono dei fessi che non sanno nulla del sistema bancario "ombra" punto fondamentale della finanza senza regole.Il loro problema è Brunetta o il Santoro che va via dalla Rai.Anglotedescowww.anglotedesco.splinder.com

  12. I think this well intentioned piece is more about demonizing the corporate sector, which is certainly deserved, than about MMT. I'd prefer starting with the gold standard. We transitioned from the gold standard so smoothly that nothing changed. To the extent that people think at all about economics they think in gold-standard terms or household terms which is much the same.Galbraith, Wray, and Mosler draw a very civilized and understandable distinction between government and private finances in their Levy Institute Policy Brief ppb_98.pdf http://www.levyinstitute.org/publications/?docid=1119Once people accept the difference between household and government financing, perhaps they can begin to accept the positive consequences. The corporate conspiracy rationale inspires emotion rather than thought.

  13. Just wanted to highlight this because I absolutely love irony.Mises said:"MMT has never been about economics. It has always been about social engineering, creating the ideal world according to some disenchanted academics."Okay, so us MMTers are 'disenchanted academics' because we want to 'create an ideal world'. So what does Mises advocate?"The only way that the little guy wins is with a free market. The free market society allows for choice. That's why it's called free. Maybe one day America will adopt free market capitalism."An 'ideal' free market capitalism that, according to Mises, does not yet exist. Hmmm…Anyone ever notice this discrepancy with the Austrian School? They accuse Keynesians of being murky intellectual types that want to use social and economic reforms to promote what they see as a better world. But the Austrians themselves seem to advocate using social and economic reforms to promote what THEY SEE as a better world.Holier than thou, much?

  14. I stopped reading as soon as he stated we are not political and immediately followed that up by adding "Ask yourself: What's the government for?The obvious answer is to run the country, ok. Anything else? Yes, government should be there first and foremost to look after its people as youths."I don't want the government "running" the country and I think primarily parents should look after their own kids, not government. This explanation smacks of a leftist fantasy right from the get go and I'm an MMT supporter. We can do better.

  15. I phrased it in wikipedia like this:"According to modern monetary theory austerity measures are usually counterproductive because neither taxation or bond issuance act as a funding mechanisms for the government. Instead all spending is done by crediting bank accounts, so national government's cannot run out of money unless they have fixed exchange rate to either foreign currency or gold, or they do borrowing in foreign currencies or they are part of a larger currency area like the eurozone where they do not have right to issue money."Now fortunately over 1k people daily have change to read it. Most people have very fuzzy understanding how monetary system operate and therefore, whatever convictions they have are not well anchored. And here on the internet discussion groups goldbug viewpoints are over-presented. Those poor souls seem to be obsessed with money. But MMT-promoters should not think that the message should be "toned down" because of some loud minority.I think most people have intuition that government cannot run out of money, because that would make no sense whatever, but they need someone to say it out loud to confirm their beliefs. It takes years of schooling or constant propaganda to convince them otherwise.

  16. Excuse me for my bad english!Reading some comments from american readers I know that the propaganda of the rich (open market) is more advanced that italy or europe.Americans regard the unemployed like parassities and they don t want the government help them but not for the financial istitutions or for the gamblers saved with bilion.This bilion dollar of the financial institutions inflation is not a danger and we will not be like weimar!Free market can not exist for the citizen because it's an ideology of the rich to exclude citizen from the economic decisions.With 20 milion of unployed there is not danger of inflation. The inflation is the obsession of rich bondholders.Who have fixed annuities bilionare.

  17. Thanks for reading this. The post had been fully vetted by Prof Wraybefore publication. He'll address technical points.Andy: I've done communication of complex issues (Globalization, ThirdWorld Debt, Medicine, Dot Com bubble…) to folks for 26 years. Yourassumption that this is "too patronizing" is a typical projection ofprogressives' idealism onto ordinary people, and it ignores theirrealities on the ground. If anything, the cab driver from Milwaukee isbegging to be explained things in this way, because no one in theprogressive camp has ever bothered to accept that these people werenever given the means to grasp very complex issues. Assuming them to beat a loftier level of understanding is no favor to them, quite theopposite, it leaves them out in the cold and in the hands of those thatfeed them in a "patronizing" manner all sorts of issues, and convincethem: these are Fox, Limbaugh, Murdoch…Tolomea: Wray will clarify your point easily, Dale also addressed it.Dale: the article doesn't go in depth on inflation because, trust me,98% of laymen don't even know what it means. But they know very wellwhat getting a well paid job guaranteed buy govt means, and as far asthis effort is concerned that's all we have to hope to be able to putacross.Anonymous: the choice of "mums" is not a Berlusconite thing, it wasactually suggested by a political lobbyist in D.C.Kervick: price stability is addressed in paragraph 8, concisely andeffectively. This is basic communication, no time here to get into details.Dale II: yes, we know very well what the US public has been brainwashedto believe, you are correct. But there's no choice. One can't dilute ascientific (and life saving message) because folks out there think thatthe Earth is Flat. Quite the opposite: only chance is to ram through asomehow shocking message, but to be there to pick up the disbelief andto explain to them. Look: Europeans are not that much smarter thanAmericans, but I ran more than 49 talks in different cities here and wasable always to get folks to see through the initial rejection.In general: I invite readers of this blog to try to descend into what isreally like to be a part time dry cleaner from Up State New York, orthat cab driver from Milwaukee. They need none of our sophisticateddistinctions, they need a message of hope now, they need to know whoscrewed them up (yes, it's the corporate sector, Dan) and that govtcould give them a job for real. All the rest is fun debating for usintellectuals, useless for them.

  18. Thanks for reading this. The post had been fully vetted by Prof Wraybefore publication. He'll address technical points.Andy: I've done communication of complex issues (Globalization, ThirdWorld Debt, Medicine, Dot Com bubble…) to folks for 26 years. Yourassumption that this is "too patronizing" is a typical projection ofprogressives' idealism onto ordinary people, and it ignores theirrealities on the ground. If anything, the cab driver from Milwaukee isbegging to be explained things in this way, because no one in theprogressive camp has ever bothered to accept that these people werenever given the means to grasp very complex issues. Assuming them to beat a loftier level of understanding is no favor to them, quite theopposite, it leaves them out in the cold and in the hands of those thatfeed them in a "patronizing" manner all sorts of issues, and convincethem: these are Fox, Limbaugh, Murdoch…Tolomea: Wray will clarify your point easily, Dale also addressed it.Dale: the article doesn't go in depth on inflation because, trust me,98% of laymen don't even know what it means. But they know very wellwhat getting a well paid job guaranteed buy govt means, and as far asthis effort is concerned that's all we have to hope to be able to putacross.Anonymous: the choice of "mums" is not a Berlusconite thing, it wasactually suggested by a political lobbyist in D.C.Kervick: price stability is addressed in paragraph 8, concisely andeffectively. This is basic communication, no time here to get into details.Dale II: yes, we know very well what the US public has been brainwashedto believe, you are correct. But there's no choice. One can't dilute ascientific (and life saving message) because folks out there think thatthe Earth is Flat. Quite the opposite: only chance is to ram through asomehow shocking message, but to be there to pick up the disbelief andto explain to them. Look: Europeans are not that much smarter thanAmericans, but I ran more than 49 talks in different cities here and wasable always to get folks to see through the initial rejection.In general: I invite readers of this blog to try to descend into what isreally like to be a part time dry cleaner from Up State New York, orthat cab driver from Milwaukee. They need none of our sophisticateddistinctions, they need a message of hope now, they need to know whoscrewed them up (yes, it's the corporate sector, Dan) and that govtcould give them a job for real. All the rest is fun debating for usintellectuals, useless for them.

  19. I reteiterate that I don't think this message – as formulated – will resonate with a large number of Americans. And that includes dry cleaners and cab drivers. Most Americans do not share the paternalistic philosophy that it is the government's role to take care of everyone, whether the young, the middle or the old. Americans have internalized an ethos of self-government. Even those of us who want more activist government see it as a way of empowering people to achieve their potential and share equally in the fruits of American productivity and effort. They don't see themselves as children entitled to a papa-government that takes care of them. Maybe this message will fly in Italy and part of Latin America – but not among many in the US.Also, the word "welfare" is a dirty word for most Americans. Even those Americans who rely on government programs like Social Security and Medicare would chafe at being told they are relying on welfare.Finally, the article as written strongly suggests that because the government is the monopoly producer of the currency, it has a bottomless treasury of unlimited purchasing power to do anything it wants. That idea is inaccurate; and putting it forward in this way would only scare people into believing that the promoters of this philosophy were preparing to pump unending gushers of increasingly worthless and massively inflationary money into the system.

  20. A year or so ago I started reading op-eds advocating remedies for the financial crisis/recession. What I found interesting was these remedies could be placed in two categories. One side advocated for increased government spending to compensate for diminished consumer/business spending. The other advocated government austerity and claimed this would stimulate economic activity. Both promised job creation! I was really confused. How was it possible that two diametrically opposed prescriptions could lead to the same desired outcome. At this point, I started to make an effort to understand macroeconomics.I came across, quite by accident, Bill Mitchell's billy blog. I've been reading about MMT there for the past few months and thinking about some of the concepts.One of the things I learned early on was that the monetary system was at the center of the economy. MMT described how the mechanism worked and that it was politically neutral. The import of this understanding was that when somebody advocated the need to reduce for example Social Security benefits it was not because of real financial constraints. There may be other reasons to reduce Social Security benefits but it certainly isn't that the country is going to go broke if it doesn't. I got that from MMT.Another thing I learned is that if you think individuals should be responsible and save for their retirement than the government has to run a deficit to make that possible for everybody to do. Isn't it interesting that virtuous individual behavior can only be achieved by everybody if the public sector does the opposite. I got that from MMT.MMT Explained to Mums has a theme of us against them. I happen to think the author has nailed it. Over the last 30 years the purpose of government has changed from insuring working people share in the economic benefits to having those benefits flow to the narrow group of financial asset owners. It has been class warfare. It just hasn't been politically correct to call a spade a spade. Dean Baker's “The Conservative Nanny State” is a good description of how this is accomplished through law and public policy choices.

  21. "But wait: do you remember that government creates its own dollars at will?""So to recap: government creates US dollars anew, never has to borrow them, cannot run out of them, doesn’t need to tax anyone to get them."You need to distinguish between currency with no bond attached and currency with a bond attached. For example, try and go to the fed and get some currency with no bond attached. You'll get the same answer as the federal gov't. No!I believe the way the system is set up now all new medium of exchange are the demand deposits (there might some currency) from debt meaning it has to be borrowed into existence."So, among other things, they worked out a brilliant catch phrase: the government's budget works just like your family's, so to be ok the government has to earn more than it spends and never spend more than it earns. They said that just as your family debt is bad news, so is government's."Actually, that is true. If everyone was smart, no one would borrow at all. That would force the economy to find another way to get new medium of exchange into existence.IMO, it should be:savings of the rich plus savings of the lower and middle class = dissavings of the currency printing entity with currency and no bond attached plus the balanced budget(s) of the various level(s) of gov't.

  22. Kervick, I roamed the Rust Belt in 2001, I saw former Unionists cry as we visited a smelting plant devoured by weed and rust. I witnessed in Pennsylvania a demonstration by sick seniors actually marching with IV drips in their arms, yelling "One meal a day or my medication". I was in Palo Alto to speak to employed Airline staff sleeping on night buses with their possessions in suitcases as rents were prohibitive… Now you are telling us that these people would indignantly rebuff an offer of jobs, free health care and good housing because it's "papa-government" that is forwarding it? You think so? Would that 79 years old man with advanced prostate cancer that's not been sleeping for 2 month for the pain tell us "you paternalistic philosophers!!…". Would that steel worker that I met on his way back from seeking an abortion for his pregnant wife because in no way they could now afford to have a baby yell at us "I have internalized an ethos of self government!!". Would they? Really?Dear friend, dear all, you are of course welcome to suggest any other way to tell MMT to the real folks out there, but please, at least before doing that go speak to those who are now doing the suffering, then report back what they would really say. Paolo Rossi Barnard

  23. Anonymous, given the content is addressed to Mums, do you think they even know what a bond is in this context? Personally, I don't think so.If it was a bond for insurance such as a rental bond or some such, they may understand but then when you use the term bond in this context, the two types of bonds will be confused.It seems the biggest hindrance to MMT being understood in the US, is American culture itself.Personally, I can understand what others are saying about this piece being too patronising but the people saying this also have somewhat of an understanding of the issue being discussed. The way I see it as potentially patronising is because it is all in a wall of text instead of a conversational dialogue that we would use if we were actually speaking. A lot of the "No" would be actual answers in conversation and there would be an actual dialogue. So therefore it is not really patronising at all.I would concur with the lack of discussion about inflation but agree that most don't know what inflation really is. However, I think most will think they do. That in itself is the catch.

  24. Senexx said: "Anonymous, given the content is addressed to Mums, do you think they even know what a bond is in this context? Personally, I don't think so.If it was a bond for insurance such as a rental bond or some such, they may understand but then when you use the term bond in this context, the two types of bonds will be confused."That is easy to fix.The fed decides to give you $100,000.The fed decides to give you $100,000 with a 4% interest rate and monthly payments so that both interest and principal are paid off in 4 years (the bond/loan part).Which will they choose?Would calling it the loan part help most people?

  25. I am sorry again if my short blunt post offended. I fully support the aims of the MMP. Professor Wray asked us to make honest comments in order to help the effort.If you casn't take mine for what it is then maybe I should be offended.If I can grasp the essentials of MMT then any Mom can. The message just needs to communicated effectively. Does that view make me a 'typical progressive'.Please

  26. cyaker. I like what the person who "roamed the rust belt had to say" other then that everybody seems too wordy and Ivory tower. Here is sample of the kind of message we need to get out. I could say more but want to keep it simple and remember think about what the other side is doing to us: once they have to explain why it won't work they have lost the argument.The American Society of Civil Engineers rates our Infrastructure a D. This includes: Roads,Bridges, Public Parks,Rail,Energy,Transit,Schools,Garbage Removal and Drinking Water.(the people killed on the Bridge in Minnesota {and their MUMs} would rate it F) http://www.infrastructurereportcard.org/MMT offers a way to fix our infrastructure and put Americans back to work can anybody else?

  27. still attached to the open market frenzy, you americans will never learn. you used to have something like free market capitalism and look where it got you… and where it got the rest of the world too. you love the idea that capitalism is competition, but competition has winners, and when some players get bigger and bully there's no way they will play according to the rules.

  28. A basic premise of MMT appears to be that a sovereign country that issues it's own currency cannot go belly up with respect to those financial obligations issued in it's own currency. The premise behind this assertion seems to be that the government can always use the printing press to pay off it's debts.But is that assertion true for countries whose central bank is independent? What happens if the central bank refuses to monetize the debt?

  29. “But who cares about the economy today? … there is no discussion of the economy, only of the finances. Short- and long-term interest rates, budget deficits, equity quotes and whatnot are discussed, but not the economy. The "economy" is not the same thing as the "finances". The economy is human activities, the way we create value by using our knowledge and talents. Today's waste of human resources has no place in the cynical world of finance.”Per Gunnar BerglundMMT is a better way to organize finances aka money so the economy can function better than the present grossly wasteful system that halts the real economy and large parts of the indispensable resource human labor is ravaged as unemployment and under utilization.

  30. Government can only create credit, not wealth. What wealth it can get it can only steal from someone else who produces it. Whenever it purchases something, it does so with the proceeds of theft or robbery.Maybe your mum had dimentia, but on her worst day, my late mother would have seen through this nonsense.So assume the government can print money – or even has exclusive access to a newly discovered gold mine that has 100 times what is above ground today. It could make everyone's dreams come true? No.The first law it needs is whatever it is using must be the monopoly currency, so if they had the gold mine, they would have to ban the possession of platinum or silver or other monetary metals since they would hedge against the inflation. And inflation DESTROYS THE POOREST members of society since every bit of income goes to buying necessities. Instead they print paper and call it a very taxable capital gain when it took 250 units to buy an ounce of gold 10 years ago but takes over 1500 today.It could "provide health care". Well, it would need doctors and nurses, but why would anyone want to labor to take care of patients when they could just get their government check without doing anything? Or who would build the diagnostic equipment? Or research and produce drugs? You can mint base metal slugs as coins but not mint working doctors, nurses, scientists, engineers, factory workers, and technicians.Why bother farming – it is a lot of work, outside where it is hot, rainy, and a lot of trouble to plant seeds, kill weeds, fertilize and harvest. Just sit back and collect the check. Maybe in this case the interest check on the government bonds (which apparently everyone here believes will buy the same amount tomorrow as today). You can print paper money but not food.But why bother running a defecit and go through the kabuki of issuing bonds, then printing money to pay them. Just print the money. As much as you need…So, Iceland, if it would throw off the corporations, could just start printing money, then they would be able to buy nuclear missiles, aircraft carriers, all the oil and other things and take over the world! Just by running the printing press.BTW – I'm a libertarian, but consider corp-se-orations as undead monsters created by the same frankenstate government. Human beings have souls and are persons, giving some abstract ghostly legal entity the same rights is madness.Government creates corporations specifically to loot most of the persons for the benefit of a few.

  31. To Paolo from one of his Italian former readers: Any revolution is triggered by no intellectual reasoning. You won't get Americans change their minds, and Europeans as well. A revolution starts only when people has no daily bread. It is far too early for that trigger…you already said it.And since someone here abused Italians I indulge myself in saying "Goddam USA".Thank you

  32. @ Anonymous of 5.34 PMYou found a great point. Basically what Paolo is proposing here would not work in a non-sovereign currency, like the Euro is at the moment. That is why you could theorically do it in US.Also, based on all the sceptical comments here, I would like to stress that MMT provides a tool, that should not be used at all times, but depending on the situation.Now the time has come for Governments to use this tool, because social disparity and unemployment are reaching an unsustainable level.

  33. I do agree with most of the critiques on this thread. It might be a service to the populist big government agenda, but it is a disservice to MMT. Thinking the ability to print money by the government means it could be able to solve the problems of all those suffering is preposterous. You might as well promise them joy in the afterlife.

  34. Barnard' s post is only understandable if one reads his essay IL PIU' GRANDE CRIMINE (The biggest crime) which deserves a full translation from Italian into English. Here you have a reduction which cannot make Barnard's arguments clear, in fact makes them fuzzy and too simple. Only those who can read it, and WANT (it is a hard reading for who's not into the matter) to read the essay can take a stand for or against what Barnard asserts on monetary systems and money. Here's the linkhttp://www.paolobarnard.info/intervento_mostra_go.php?id=192

  35. Read this http://www.paolobarnard.info/intervento_mostra_go.php?id=192you'll understand…but it's in Italian, so please translate it and let it circulate.

  36. I don't understand why, one minute, the "national wealth" is being treated like a finite pie, over which we can fight for slices and then, another minute, we're being told by MMT that there's no limit to the national wealth. What am I missing?

  37. I have a Question: before 2002, the 16 european states governments were able to print money (liras, francs, marcks, drachmas, …) as much as they wanted. Modern Monetary Theory says there's no problem in doing that (only inflaction, but there's no inflaction if money is not "given away"). Now, with European Union, after Treaty of Lisbon, can governments still decide how much money to print when it is necessary? Someone said me: no, they have to borrow euros from banks and pay interests. But Someone said me: yes they still can, they decide together with other 15 governments how much euros to print. I have read Paolo Barnard's "Il grande crimine": he said that, with EU, the 16 european states have losen monetary sovreignty and their governments cannot decide how much money to print. He also said that, before 2002, public debt was not a real problem for states, but now, with Euro, states public debts are considered a big problem. What has changed?

  38. Printing money is not the solution…is one of the tools that a nation with sovereign currency has, but that is on a pair with public spending that should create occupation and wealth. Inflation is the obvious risk, but fiscal policy is the other tool a nation has got to cope with that. This creates public debt, which is anyway a debt that has not to be "really" payed back (strange as it may sound). Eurolandia has lost this two tools since 1) printing money is not on a pair with public spending, in fact it is a real loan from private banks to nations.2) No fiscal unity exists in the UE. Indeed we should not call it "public debt" any longer but "sovereign debt" only, and the mass media make a lot of mess with that. Why all this…Paolo Barnard said it on his essay, for those who belive it. I do.

  39. As someone with no background in economics, after a few paragraphs, I thought "inflation" and then waited for the article to address the topic which it never did. Every few paragraphs, I would repeat "inflation" in my head with increasingly emphatic punctuation until I gave up on the article as nonsense. I only write this to let you see what is likely to be a fairly common response.Also, I found the article to be too antagonistic, from the divisive titular "Mums" (which many Americans at least will find insulting), to phrases like "Do you realize what you have just read?" which seem to question my reading comprehension, whether that was their intent or not.

  40. "Do you realize what you have just read"…in the previous comment?

  41. Let me try to make a simplified economy representation. Let's immagine that only 16 persons live on a island called Europa. Each one produces something for others: Italo makes pizzas, Franco makes baguettes, Germano makes crauti, Espano makes tortillas, and so on. They and sells their goods to others. As money they use credits bills that everyone produces writing on a piece of paper a "number of credits" with his signature.Example: Mr. Franco buys a pizza from Mr. Italo and pay him by means of a signed credit bill that states: "I will pay 5 credits to the owner of this bill".There is no limit to the creation of money and, in circulation, there are 16 types of it (one for each signature). All functions well.Unavoidably, after a certain time, there will be uneven quantities of each type of credits, not only because some persons works more than others but also because some people do works that are more in demand than others: a man that does a very on demand and profitable work, has to make no credit bills because, for buying, he can use credit bills earned from others. On the contrary, a man that do a not much on demand nor profitable work, having earned a few credits, has to make a lot of credit bills to buy from others.Obviously when there is a lot of credits that can buy a work that is not much on demand, unavoidably these credits have a low value.So we can see that, in this simplified economy, if a person do a work of poor interest for people, they buy it little, then he become "poor", and remains "poor" also if he can print credit bills, because these have low value. He basically is a debtor because he buys more than he sells, or he takes more than he gives.However, I think that the low value of his credits are a stimulus for learning a more useful work, or making his work more profitable (and therefore useful).Now, if the island's 16 persons together decide to use a single currency (and they call Euro), does the "poor" situation improve? I think that it get worse, because now he has no control on how much he can spend (not only to consume but also to invest in improvements for him and others), now he has a "true debt" and the "rich" people say him what he must do to pay it. I think that if he want improve himself, he must stay out from Euro and begin to better organize his life.Here I stop my "economy for kids". I hope it can help me to understand and this interesting MMT discussion to proceed. Thank you for your attention.