By Tracy Marvin
This is the last (most certainly not least) of the videos produced by Eric Tymoigne’s students in his modern money course at Lewis & Clark College.
Ok, Eric. You and your kids owe me a new computer keyboard. When the gal in that video asks, “Why would politicians want to spread misleading information,” I just lost it, and when you’re drinking coffee at the time, that tends to get messy.
First you mention that the government is sovereign in its currency; then later you say that there are numerous benefits that flow from paying the FICA tax. That is contradictory. It should be stated at the outset that taxes in a fiat system pay for nothing whatsoever. They serve quite different functions.
Secondly, it would be a good rhetorical tactic to immediately address the fact that government spending–via their agents, the banks–is the sole source of currency in the system: accounting identity of government deficit = assets in the private sectors.
First paragraph, correct. 2nd paragraph, the actual equation is: Federal Deficits – Net Imports = Net Private Savings (not Assets).
Rodger Malcolm Mitchell
PLEASE SUPPLY A TRANSCRIPT for these videos. Watching these vids are on iPhone are fine if you’re near wifi or you want to use up your data quota.
But it would be so much easier to use Instapaper or the Read Later feature, and be able to read these in text format.
Please consider it.
Terrific video, but there is one problem, i.e. the “problem” of insufficient future productive capacity. We are in a world market. Goods and services are available world wide (he says as he nibbles his blueberries from Chile, while carefully driving his German car).
You are correct however, that far more should be invested in R&D, not only to increase U.S. productivity, but to compete worldwide.
Good job. I’ll link to you from my site.
This video presents many conflicting interpretations of MMT.
MMT states that taxes are not needed to pay for anything. This video does not make that point clear.
Future productivity constraints would be much lower if:
Taxes of all kinds were eliminated since they serve no purpose-except when inflation became an issue, which is currently not likely.
Investing -with government funding if needed, in research, investing in mass transit, investing in education, investing in anything to make workers more productive would seem to be an extremely high imperative. I don’t think either political party gets this point.
Ray, I agree with your comments.
When is Eric going to put his courses online? Exciting to see some college students getting a real education.
Yes, there are places this could be clearer but overall a fantastic effort. The voices chosen are a bit annoying to my ears. Agree about transcript being a good addition.
FDR may have implemented social security but to my knowledge Thomas Paine first proposed it along with a stipend for households just starting up . See Agrarian Justice at http://www.ssa.gov/history/tpaine3.html
hello everyone. the transcripts of all videos will be available soon. I see that the video created a bit of confusion regarding fica. indeed the two views are there but note that the non-MMT view is presented by the student after he read the trustee report. that is why he says fica fund ss; then the professor presents the mmt view. the course iz already online. to my webpage and clicl ,homepage,. all the slides and additional videos are there
Apparently, there are two schools that teach correct economics, UMKC and Lewis & Clark. Wouldn’t it be nice if Harvard, U. of Chicago and Stanford got the message?
The histories behind the creation of these so-called places of learning, notably Harvard and Stanford and may I include Yale explain why they all are purveyors of misinformation. Take a look sometime.
Are you teaching introductory economic classes at L & C? Or is this part of an advanced elective?
This course is an advanced elective. Intermediate macroeconomics is a prerequisite and money and banking is recommended.
Syllabus is here: http://college.lclark.edu/live/files/11164-econ-320
Course slides are here: http://legacy.lclark.edu/~etymoigne/Eric%20Tymoigne.htm
do they teach pke at all levels? thanks for your response
I teach pke a little bit at the end of intermediate macro (I reserve about a week and a half for it, and I make a point of making sure it is taught). Advanced macro has more pke, institutionalist, marxist papers. Otherwise marty hart-landsberg is the marxist in the department, the rest of the faculty teaches along more neoclassical lines.
What’s amazing to me is how few economists seem to understand this fundamental equation: Federal Deficits – Net Imports = Net Private Saving.
What do they teach at schools like Harvard and U of Chicago, anyway??
At the center of government there is a Treasury department, with a Treasurer, a Comptroller and an auditor of accounts. It is the jobs of these 3 positions, spelled out here,
that they accumulate all government tax and bond receipts into the Treasury General account and pay for all government services out of that general account, and further that they cannot spend ANY money except it first being in the Treasury General account.
Does the MMT construct follow that the people in these three positions are:
A. Not doing their jobs?
B. Not aware that they cannot do their jobs due to the nuances of reserve accounting at the private central bank?
C. Not aware that when they spend from the TGA account that they are creating new money, rather than circulating M1 back and forth between checking accounts?
The federal government is Monetarily Sovereign. Being sovereign means having total control over dollars. If the government wants to add dollars to any balance sheet, it just does so. It is sovereign.
Visualize you are the banker for a Monopoly game, and you run short of Monopoly dollars to distribute to players. What do you do? You cut up some pieces of paper, write “DOLLARS” on them, and voila, you have more dollars. The banker in a Monopoly game is Monetarily Sovereign and cannot run short of Monopoly dollars. So too, the U.S. government is Monetarily Sovereign, so cannot run short of U.S. dollars.
In fact, it is even easier for the U.S. government. It doesn’t need to “print” dollars. It has the power to mark up any bank’s balance sheets, including its own. You will not understand economics until you can get your head around the meaning of “Sovereign” in Monetary Sovereign.
None of the offices you mention make payment decisions. They merely execute the decisions of Congress and the President, via federal agency bill paying. In a sense, it’s similar to the way your bank operates, when you pay bills. You make the decisions and your bank merely executes them.
Actually, it is Congress and the President that is A, B and/or C.
Rodger Malcolm Mitchell
Well, Rodger thinks this is about monetary sovereignty.
And I agree. Just NOT with his definition.
Every sovereign nation is, by its Constitution, sovereign with regard to its money.
It is NEVER not monetarily sovereign.
We already discussed that last video.
What Rodger glosses over is that EVERY modern sovereign nation binds itself from limitless largesse BY the government with regard to money by its system of laws – laws that effect the money system and laws that effect government finances.
The government COULD pass a law that says it can spend as much as it wants – WAH! WAH!.
But our government didn’t pass that law.
Instead, it has set up several monetary regimes – all of them legal acts of sovereign that can be undone by further sovereign acts.
And it has established laws regarding government finance, including the one referenced earlier.
Rodger, and perhaps others, perhaps a majority who attend the MMT school, is in denial of these laws that DO govern the financial operations of the Treasury.
When he says things like -
“If the government wants to add dollars to any balance sheet, it just does so. It is sovereign.” –
he never offers any proof – just some spoutings about August 15, 1971 – a completely immaterial date for anything to do with our national money system.
Rodger is talking about Treasury expenditures.
The law, the regulations, the public pronouncements of the Department of the Treasury ALL say the same thing.
The Treasury Department must live within the law.
The Treasury department MUST have a positive balance in its account before it can write a check.
Again, is it the Comptroller, the Auditor, the Treasurer or the Registrar that is not doing his or her duties?
Or do we plod ahead, pretending that the gold-exchange standard had any control over the internal workings of national government finance, somehow being responsible for the government following the law of the land?
We are monetarily sovereign. What we need is a law that says the government CAN pay for its deficits through money-creation, which a sovereign government can do, with or without a gold-exchange standard.
THAT would be something with which to make progress.
Joehbed, you said, “Every sovereign nation is, by its Constitution, sovereign with regard to its money.”
So do you believe Greece, France, Portugal, Spain and Italy are Monetarily Sovereign?
And do you believe the U.S. is not Monetarily Sovereign?
And what, in your opinion, is the difference between Monetary Sovereignty and monetary non-sovereignty?
Hard to know what you are preaching.
He is not using the same definition of monetary sovereignty. See the comment on the monetary sovereignty video.
Eric, he said, “Every sovereign nation is, by its Constitution, sovereign with regard to its money,” which would make Greece Monetarily Sovereign. Yikes!
His would be what I call the ” Through the Looking-Glass” definition (“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”)
Rodger, you know exactly what I am proposing for reform.
An end to the debt-based system of money, and resort to government-issuance of all the nation’s money without debt – you know, like a monetarily sovereign government SHOULD do for its people.
Like what is in the Kucinich Bill – H.R. 2990.
Almost like what MMters claim we can do now.
But. we can’t.
That’s why we need reform.
I just noticed that Eric was trying to clarify the definition of sovereignty.
We agreed that monetary reformers like myself use the definition contained in economist John B. Goodman’s book titled: Monetary Sovereignty – of all things, Rodger.
MMTers call their system of understanding modern money – sovereignty – for many reasons that have nothing to do with sovereignty, but essentially ‘policy space’.
Yes, of course Greece, etc are monetarily sovereign.
It was an act of a monetary sovereign to join the EMU.
Should their government change and should they exit the Euro, that would be the action of a sovereign government.
Fixed exchange rates, foreign currency borrowings, floating exchange rates, the gold standard on and off, these are all acts of a monetarily sovereign government.
Any government not monetarily sovereign would not continue to exist.
Of course, the U.S. MUST BE monetarily sovereign. We were born as a nation in a fight for monetary sovereignty.
The British would not allow the Colonies the use of their own currency.
Read Ch. 14 of Stephen Zarlenga’s book on The Lost Science of Money.
“Every sovereign nation is, by its Constitution, sovereign with regard to its money.”
No, it’s not. Even I know that and I am not an economist.
This is the great point you are missing. Italy, Greece, Spain, and Germany are not sovereign. So what the hell are you talking about?
“Yes, of course Greece, etc are monetarily sovereign.
It was an act of a monetary sovereign to join the EMU.”
No, it wasn’t. Look at the result. They GAVE UP their sovereignty.
“”Italy, Greece, Spain, and Germany are not sovereign.”"
Somebody ought to take down the flags.
“”They GAVE UP their sovereignty.”"
Sovereignty is not something you “give up”, except by way of surrender.
Sovereignty IS the supreme political power.
What you’re confusing with monetary sovereignty is monetary autonomy and independence.
That is what the EMU nations gave up.
That is what they will regain when they leave the EMU.
I’m not an economist either.
Neither of you are economists, but that doesn’t prevent you from pontificating on economics. I guess you must have a special gift.
But, some of my best friends are economists.
And, I played one on TV once.
Well, not really TV.
More like video.
OK, it was my own show.
I come here to honestly debate any political-economic construct that relates to our misunderstood monetary system. I thought that was the value of the free internet.
I have studied that national money system for 40 years and I put it all out there for such debate and criticism.
I never went to college.
I promise to hold nothing against you if you are in fact an economist.
Some of my best friends are economists.
Resort to ‘shooting the messenger’ is the act of the desperate and the bankrupt.
I was making the simple statement that Greece gave up the drachma, France gave up the franc, Spain gave up the peso, Italy gave up the lira, and Germany gave up the deutschemark, etc. for the Euro. Each gave up their sovereign currency. They do not have sovereign monetary systems. They’re on the Euro.
First, may I be clear that my comment directly above yours was in reply to Rodger Mitchell.
Each of those simple statements you make is true, but they come to a wrong conclusion about monetary sovereignty. It’s not so simple as it appears.
Sovereignty over money means the supreme legal and political power over monetary matters.
In his book on “”Monetary Sovereignty: The Politics of Central Banking …”, economist John B. Goodmaan is clear on definitions and meanings in these particular matters.
Writing in the Chapter on Politics, Economics and Central Banking, he states:
”While states have maintained their monetary sovereignty – that is their legal and political supremacy on monetary matters – they have progressively lost their monetary autonomy”.
He further clarified this by footnote:
“Sovereignty” refers to the legal and political authority that makes the state supreme in its domain.
Monetary “autonomy” means that a state is able to set and maintain a monetary policy which is not driven by international markets or exchange rate regimes.”
Each of those Euro regimes maintained their monetary sovereignty and gave up their autonomy by adopting – for a period ascertained by the existence of a series of treaties and agreements – the Euro as their national currency.
To adopt another currency is akin to adopting a gold standard, or a fixed exchange regime or, to a lesser degree, joining the IMF.
Presently, those nations are contemplating additional steps that include their rights to implement their adopted budget in their national interests – ostensibly to save the Euro. If and when they ever move into these additional measures, it is entirely possible that they will agree to give up their monetary sovereignty. Perhaps unwittingly.
But right now, tomorrow, any one of those nations can take the step of reversing their participation in these various agreements by exercising their monetary sovereignty – their supreme legal and political power over money – so that their monetary autonomy can be restored.
A state is generally considered monetarily sovereign to the extent that it retains the following legal rights:
1. The right of legal tender – to choose which currencies are acceptable as legal tender for payment of taxes and other legal debts.
2. The right of issuance and retirement – to control the issuance and retirement of any coin or fiat currency.
3. The right of currency monopoly – to maintain a currency monopoly by effective control of competing currencies.
John Goodman’s (Is he the TV comedian? He must be.) definition — “legal and political supremacy on monetary matters” — applies to my wife, who has legal and political supremacy over our family monetary matters. But we do thank you for supplying a definition used by no economist on earth. Your creativity is good, especially since you never went to college. Impressive.
First, John B Goodman was a Harvard Business School Prof when he wrote that book, and has authored widely on central banking, international banking regulation and capital controls.
The guy playing superbly opposite Roseanne was John Stephen Goodman.
Rodg, thanks for citing Gianviti’s paper. I was going to do it myself.
I start by actually quoting from the IMF’s General Counsel’s 2004 work.
“”Monetary sovereignty includes essentially three exclusive RIGHTS for a given state:3
- the RIGHT to issue currency, that is, coins and banknotes that are legal tender within its
- the RIGHT to determine and change the value of that currency; and
- the RIGHT to regulate the use of that currency or any other currency within its territory.
The first and third RIGHTS correspond to the role of money as a medium of payment. The
second RIGHT reflects the role of money as unit of account.
Conceptually, the two functions may be separated: a monetary unit of account may be represented by coins and notes bearing a different name (e.g., in France before the Revolution,5 and recently in the European Monetary Union during the interim period after the euro became the official currency and while national currencies were still being used).””
END (MY emphasis)
Whoa, Rodg !
Turns out a monetarily sovereign government’s ‘unit of account’ can be represented by, well, ANYTHING.
Like, say a EURO.
I want to thank Rodger for helping inform the readership on this second-tier essential matter: what, really, IS monetary sovereignty?
PLEASE note that, according to Gianviti’s paper – which I HOPE everyone reads – monetary sovereignty includes exclusive RIGHTS of the state.
Did ANY of the EURO countries give up any of these rights?
They maintain the RIGHT and can restore the RIGHT at will.
(Of course, Illinois DID give up those rights in joining the Union. and as a result, they are not sovereign in money)
Gianviti’s exposition of the rights of Issuance, Valuation and Use are the same sovereign rights established in our national Constitution.
The CONGRESS shall have Power:
To coin Money, regulate the Value thereof and of foreign COIN….”
Congress gave up its money-creation function to private bankers at the Fed.
But it never gave up its RIGHT to create and issue the national currency.
France never gave up its RIGHT to create the Franc – it merely adopted the Euro as its unit of account.
Just exactly as Gianviti explains here.
However, the deeper truth is contained in Gianviti’s further exposition of the nature of the legal rights of Issuance, Valuation and Use of the National Currency by the sovereign state in money matters.
Both Gianviti and Goodman rely extensively on F.A. Mann’s The Legal Aspect of Money. (I only have the 4th edition)
Sorry, Rodger, Goodman’s definition with regard the state’s supreme legal and political authority over money merely becomes functional in Gianviti’s 1. Issuance, 2. Valuation and 3. Use of the national currency.
They are complementary, and not contradictory, aspects of sovereignty.
Monetary Sovereignty – if you are a nation-state, then you have it.
“France never gave up its RIGHT to create the Franc”
Problem solved. France can just pay its bills with francs; Greece can pay its bills with drachmas, etc. I didn’t realize it was that easy.
There is undoubtedly a rough political-economic road paved by monetary ‘unions’ – that was all pretty much the purpose of Goodman’s book on the subject. Much more so than Gianviti.
Point BEING that it will NOT be easy – I never said so – but it will be possible, because they never gave up those sovereign RIGHTS laid out in G’s paper, those of Issuance, Valuation and Use.
It will undoubtedly be a good old fashioned horse-trading slug-fest (among lawyers).
The EU contemplated these sovereign political unions (now called fiscal-unions) in order to complete the transition to a United States of Europe.
Hopefully, they are not going to get it.
What is more important to me as a monetary REFORMER is that, should Greece resort to the Drachma, it immediately begin its internal issuances of the currency unit WITHOUT DEBT.
Then Greece can have the wonderful things we all want for a sovereign people.
joebhed does not know what Monetary Sovereignty means. He read ONE book that offered a weird (wrong) definition, and now he has adopted it.
The IMF describes it properly at: http://www.imf.org/external/np/leg/sem/2004/cdmfl/eng/gianvi.pdf
The U.S. is Monetarily Sovereign. Illinois and France are not.
Are you suggesting that having a technocrat installed rather than democratically elected decision makers is what occurs within a truly sovereign nation? Looks and feels like surrender to me.
@ Charle Fasola
Not sure I understand.
A technocrat installed versus democratically-elected decision-makers – for what decisions?
I’m looking at the operational identities and functions for the national monetary system.
In essence, money-issuance operations and functions are spread among technocrats and the elected officials who make the related laws.
The technocrats would decide “how much” is issued (new money).
Elected officialdom(Our U.S. Congress) would decide what gets funded – in its budget.
No secret bureaucracy – all above board and transparent.
Rather, it is a reclaiming of what Lincoln described as “the supreme prerogative of government”.
To actually BE the monopoly issuer of the nation’s money.
“joebhed does not know what Monetary Sovereignty means. He read ONE book that offered a weird (wrong) definition, and now he has adopted it.”
Another missed messenger shot .
I’ve already clarified Goodman’s extensive work on Central Banking functions.
I look forward to Rodger’s reply and moving into Mann’s Legal Aspects of Money.
But I want Rodger to know that I have read every book I could ever find on Monetary Sovereignty.
As the operator of the website by that name, perhaps Rodger could show me some publications that are not so weird as the Harvard Business School prof’s work.
I am open to reading anything you have, Rodg.
anything by L. Randall Wray
I see no titles on sovereignty and money.
I haven’t read your book. Our dialogue leaves me doubting it has much scholarship on the sovereign nature of money. No sale.
I’ve read Mosler’s 7-Frauds stuff and do not agree with most of them, they are just unproven claims.
Also his Soft Currency Economics and other publications at length.
Same with Randy’s UMM, which I lost at the The Levy-Minsky Conference, and DO need to replace soon.
His latest paper is in much more detail on the history of money,
but he errs early in uncritically adopting Innis’ view of money as debt, leaving him unable to utter “money” without being followed by “unit of account” – it’s lesser role.
He ignores the primary monetary system function of providing the means of exchange for the national economy.
I prefer Soddy’s The Role of Money as more science-based than Wray’s views.
I offer monetary historian Stephen Zarlenga’s critique of Innis views, which I have long been aware of, but which just became public, in further explanation.
Just as Randy is advancing an “alternative” history of money today, after thousands of years of pontification, it is not an issue that is resolved among the leading economic schools. It is an issue about whose truth over the ages has been shaped by the primary holders of the subject.
Joe, thanks for the Zarlenga piece. Took a quick read. The problem, as with many MMT fans (who unfortunately are spreading this bad meme, recapitulating the decline & fall of Keynesian economics) is that they don’t use the word “debt” according to its dictionary meaning. The dictionary meaning accords with how everyone uses and thinks about the word and concept “debt”. Lexicographers are good economists! But how most people, including economists, think they use & think they think about debt is just plain wrong, incoherent, inconsistent and does not accord with the dictionary, logic & sound economics.
It’s a simple, trivial, semantic, metaphysical navel-gazing point. Easy to miss. But not understanding it leads to garbage economics. And in any field, the best & most important work is understanding such trivialities. (To a mathematician, “entirely trivial” is either an insult, or the highest & very rarely accorded praise.)
Innes is 100% right that money is credit/debt, by definition. And everyone knows that. You know that. You & Zarlenga know that money is debt. You & he are twisting Innes into saying something he is not saying – that all money is bank debt, and seeing contradictions which are not there. A government printing greenbacks is issuing debt according to the standard, universally familiar & accepted, correct, philosophical, dictionary meaning of debt.
Until I saw a paper by Tymoigne, I thought that the MMTers were entirely ignoring John Commons (who Keynes rightly thought was the contemporary economist closest to his thought) – who imho is still greatly undercited & underexploited. The central chapter “Futurity” in his Institutional Economics is very clear on these matters, and clarifies the contributions of MacLeod, who Mitchell-Innes cites as his source.
As I’ve said before I do agree you are making important, essential points on “monetary sovereignty”. The true measure of sovereignty is that something is a (recognized) distinguishable entity. So Greece still has the most important sort of monetary sovereignty, in reality & according to international law.
Greece has sovereignty, but it isn’t Monetary Sovereignty. It can’t control the currency is uses — the euro. It doesn’t have the unlimited ability to pay euro-based debts, which is the source of its problems. By contrast, a Monetarily Sovereign nation, ( U.S., Canada, Australia, China et al) can pay any size debt denominated in its sovereign currency.
To deny the obvious difference between the above-mentioned nations and, for instance, the PIIGS, is to play some sort of semantic game. Monetary Sovereignty and monetary non-sovereignty are different, and not to see that difference is not to understand economics.
There are obvious “differences” between Greece and the U.S.; those of lost autonomy and independence of the national monetary authority, not one of sovereignty, which the national authority maintains.
Using your own reference (ECB’s Gianviti), monetary sovereignty is about the “rights” of the sovereign to determine the issuance, valuation and use of money within that sovereign country.
Of course Greece has the “right” to control the currency it uses.
The exercise of those sovereign monetary rights includes the passing on to others both autonomy and independence. That is no different from our Congress abdicating its independent, autonomous authority of “issuance” of our national currency over to an international cartel of private bankcorporations.
What I can’t seem to find is a definition of monetary non-sovereignty, a quality which you claim a number of sovereign nations possess.
Where did you find that concept ?
Thanks for the note on Zarlenga’s critique of Innes. In sum, it is one of disbelief of his ‘words’.
I do agree that Macleod’s “freewheelin” approach to things monetary is little recognized and his work deserves a much greater profile in the evolution of credit-money thought.
I see his work as being more definitive in regard to the role of “credit” in relation to the more traditional role of role of “capital” in socio-economic development, and not relating to the more fundamental issue of the role of money in a national monetary system, and more importantly, the real national economy.
His truly superlative work does little to inform our discussion point of whether money IS, and therefrom must always BE, debt. The position of reformers like myself is that money inherently is not debt, does not need to be issued as a debt, and that its continuing debt-issuance is the basic cause of the financial instability about which Minsky hypothesized.
Lexicography is not my bailiwick.
It’s fine for you to state your opinion of what you think “everyone” knows, and thinks they think they know, about what words mean.
Respectfully, please do not include me in your ‘everyone’ here.
Please neither presume nor assume that you know anything at all about what I think or what I know.
I am very keen on sticking with the reality of the meaning of words, especially those that represent an understanding of an important outcome.
The outcome is financial and economic instability.
It is well to ponder amidst this continuing cloud around money the very simple ‘logic’ contained in Atlanta Fed Credit Manager Robert Hemphill’s observation on the debt-based system of money we now have:
“Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. “
The solution should be logically available to those who understand this staggering thought. Hemphill was an early supporter of the Chicago Plan and other related reforms to the national money system, like the NEED Act: one of permanent money-creation, providing the means for exchanging goods and services without issuing debt.
MMT’s ironic construct of what money is actually purports to solve that problem, while doing nothing about the real private debt-based issuance of our money.
That’s what I think.
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