Will the Real Alan Greenspan Please Stand Up (for America)

By Stephanie Kelton

What’s gotten into Alan Greenspan?  Is he schizophrenic?  Has he gone senile?  Or is he simply shilling for Wall Street?  Whatever the explanation, something doesn’t add up.  What happened to this guy, who boldly declared that the US government can always pay its debt?

Or this guy, who confessed to Congressman Ryan that Social Security wasn’t financially unsound?

Where did this guy come from, and why is he claiming that we have a “debt problem” and that our entitlement programs are “unsustainable”?


Could it have anything to do with that Wall Street shill Peter G. Peterson, whose name is plastered all over the canvas in the background?

52 Responses to Will the Real Alan Greenspan Please Stand Up (for America)

  1. I heard Greenspan say that the Fed had learned to make fiat behave like gold as if that was a virtue and Greenspan was once, at least, a strong advocate of gold as money, if not for an actual government enforced gold standard. So Greenspan is apparently in favor “virtual gold.”

    Also, don’t forget that many regard recessions as necessary to “purge the malinvestments” instead of an inevitable consequence of money lent into existence for usury.

  2. Oh shucks, he just forgot we can print money – you know when you get to a certain age, you tend to forget things like that …. hmmmm, now where was i, again? oh yeah – he did remember to point out that minor detail, however, that all these predictions of doom and gloom come out of the same models which failed to predict the ’08 crash – those wouldn’t be the same models that contained the “fundamental flaw” in his worldview, now would they ..?

    Poor Alan, I think he knows what he is saying is BS – his caveat re that “little detail” indicates to me he does, but Pete probably just fed him a good meal and he didn’t want to seem an ungrateful guest ..

  3. You actually expect integrity from this person?

  4. The Dork of Cork.

    Again I would like to highlight the great danger in this.

    The UK of 1914 was almost exactly in the same position that the US is in now as it could “print” gold from Canada & South Africa – it just needed some time.
    The UK as the center of global empire and banking was in real goods deficit just as the US is now.
    It could have accepted a lesser role in the world but did not.
    It engaged in the war to end all wars which destroyed its empire anyway but at the cost of all those consumer soldiers which functioned as a conduit for the BoEs recapitalisation.

    You are dealing with the most evil bastards imaginable who previously raised & destroyed Scotland and Irelands productivity so as to increase efficiency in the first detailed historical recording of Marxs labour theory of value in operation during the Tudor to Hanoverian period and beyond.

    Neither the UK nor the US today is a true sov state – they function as the favoured base of operations for the cartel – thus you get much of the bounty from these global banking operations until they decide to move shop again.
    These are shallow greedy and ruthless men.
    You are making a pact with the devil.

    The late great Tommie Weir said it best but in my words they are destroying productivity for the many so as to increase the efficiency for the few.
    Cattle transhumance was a labour intensive but productive business.

    They cleared the land for sheep which destroyed the productivity of the place but increased the efficiency via the almost total destruction of labour inputs.

    Looks like history is repeating – maximization of profit for the few…….the Hanoverian few.

  5. The Dork of Cork.

    The US has a very serious choice…………..

    It can print greenbacks that will destroy the banking systems hold on it but at the cost of vastly reduced oil consumption or it can make a deal with the devil for a few BTUs more.

    I guess it will be the second choice given that now it is a true victim of this opiate addiction.

    The people in their wild now unthinking addiction will simply not understand.

  6. No matter what position he takes on the operational details of the system, the real Alan Greenspan is a hard core “makers vs takers” guy who thinks the poors will ruin everything with their selfish insistence on eating (about 2:10 in the last clip):

    “…as social benefits rise, the savings, the domestic savings of the american economy declines and that is basically the root source of funding for capital investment and capital investment is where productivity comes from and productivity is where economic growth comes from…”

    • MMT — loans create deposits. Also, Govt spending creates deposits. Recipients — corporate or consumer — store that money in the banking system, one way or another.

      The next sentence is highlighted by the debate between Krugman and Steve Keen. NO, wrong, Aggregate Savings by consumers (aka de-leveraging) does NOT create more capital for investment, except maybe the savings of Venture Capitalists. Other than that, Banks CREATE Deposits when they create LOANS. They don’t loan out existing deposits in their Reserves. Or shall we say, they DO “loan” out their Reserves, but to the Treasury (which doesn’t need loans) and to other banks (interbank lending to satisfy paltry Reserve requirements, two weeks in arrears after new loans have created shortages in Reserves).

  7. Hey, Steph, we must remember that, first and foremost Alan Greenspan is a Friedmaniac, a Randian Neo-Conservative. He is still, regardless of some confessions in the aftermath of the big crash of 2008, anti-regulation, and wants dearly to protect his elitist friends, which means falling in line with the austerian movement. He simply doesn’t want to tell it like it is. That does not serve his ulterior motive, to promote the top at the detriment of the bottom. This is not economics, it’s just politics, plain and simple.

  8. “…as social benefits rise, the savings, the domestic savings of the american economy declines … Al Greenspan

    Actually, it is defict spending by the monetary sovereign that allows domestic saving. Otherwise, all real capital will eventually be owned by the money lenders. And properly speaking, they should not be regarded as “benefits” but as crude restitution for theft.

    and that is basically the root source of funding for capital investment … Al Greenspan

    No, the root source of funding for capital investment is a form of counterfeiting – so-called “credit creation”

    and capital investment is where productivity comes from and productivity is where economic growth comes from…” Al Greenspan

    Yes but what good are productivity increases if they are financed unethically? The increase in productivity is offset by increased social costs.

  9. I believe he is back in his role as FED chairman. He says it both ways, just as he used to do with FED announcements. Everyone can hear what each wants to hear.

  10. Mark Robertson

    GREENSPAN @ 0:57 — “I am more concerned about the market effects as a consequence of failing to resolve the fiscal cliff than I am about the actual dollar figures of what happens to taxes and spending.”

    TRANSLATION: Let the masses starve. I have to die soon. Millions should die with me. Let the real economy remain in a depression forever. What’s important are my rich friends in the financial economy. As for me, I’m 86 years old, and everyone treats me like I already have been called back to Satan. At least Pete Peterson sends me a card during the Hanukkah season. One person told me I am contradicting everything I said throughout my life, but I don’t remember what I said. I just read what Pete puts on the teleprompter. Wait…what…were we talking about again? Did you have a question? Or did I?

  11. Mark Robertson
    That acctually means opposite of how you understood.
    “Failing to resolve” could mean either cancel or solve it. There is no meaning there on how to resolve it.
    “then I am about actual dollar figure” which means deficit. He is les concerned with deficit.

  12. “What’s gotten into Alan Greenspan? Is he schizophrenic? Has he gone senile? Or is he simply shilling for Wall Street? Whatever the explanation, something doesn’t add up. What happened to this guy, who boldly declared that the US government can always pay its debt?”

    I don’t think he’s changed his mind. His very las statement, “They are hurtful”. What I hear are a bunch of insecure men masking as men of wealth and emotionally many of them are bankrupt.

  13. Professor,

    In the first video he tells Gregory we can pay any bill even if there were a default because the Fed can always print up the money. Gregory didn’t follow up with the logical (to me) response which would have been but won’t that result in a massive inflation or a currency devaluation or do I misunderstand something here? To me not asking that lets Greenspan off the hook. So we still don’t know who he is.

    In the second video we get the picture. First he reminds us that the Neo-Classical models that failed to predict the meltdown are basically useless now so forget using those for predicting anything regarding the effects of the fiscal cliff. In lieu of what the now defunct models he proceeds to tell us of what his main worry is (of course this better be our worry): ” I am more concerned about the market effects of failing to resolve the fiscal cliff.” What a surprise.

    Perhaps the most interesting comment he makes is: “…what the data clearly shows is as social benefits rise the domestic savings of the American economy declines. That is the root source of capital investment and capital investment and capital investment is where productivity comes from which is where economic growth comes from.” That comment is so superficial and specious it should have instantly destroyed his credibility but Veshi never said a word, And if there were no social benefits what would be the impact on domestic savings in that case?

    Then later “…..if we have to a have a moderate recession ( read to mean the imposing of sever austerity) to solve this huge fiscal crisis then that is a small price to pay”. Un-freakin-believable. Is this Recession Engineering or somethng? And no model to help provide some guidance on where its going. This guy is freakin dangerous!

    And then “Unless we reign in the spending growth this economy can’t function” Ya see Professor you and all your MMT compadre’s and the rest of the 47% and the other 99% we’re all living way beyond our means. Looks like he hasn’t watched your videos Professor. Shame on him.

    I don’t know. To me it looks like the same old Neo-Classical Greenspan angling for another wealth transfer to the rich. In any reasonably just society this guy would have been in jail years ago.

    Someone with the credentials should write CNN a refutation of these points. I don’t know like you maybe.

    Anyway thank you very much for all you do to educate people like me on MMT and economics in general it is very enlightening and extremely relevant.

    “Could it have anything to do with that Wall Street shill Peter G. Peterson, whose name is plastered all over the canvas in the background? ” Ya thnk??

  14. While not sure that the Chairman’s presentation on the workings of government finance isn’t situationally-derived, as another commenter said, I don’t necessarily see the direct contradiction among his statements.
    The first two seemed clear that neither insolvency nor system failure were really of concern when it comes to both debt-repayment and social security – it being always governmentally possible to either print money or commit adequate resources.
    However, his latter point, while not necessarily contradictory, laid out a belief-system scenario that is much akin to that professed by the Bernank.
    The private sector needs both money(savings) and confidence in order to bring about another investment cycle, and therefrom, the investment cycle is what brings about prosperity. Thank goodness !
    That’s why the Bernank sees QE as a means for enhancing “the markets” – to build up asset and commodity prices, therefrom returns, therefrom investment.
    Yes, Mr. Peterson would be thankful for either Chairman’s remarks.
    So, the difference I see is one between insolvency and failure of public systems – we stand protected, and how and whether we can have economic growth with what the Peter-heads see as excessive taxation – when that taxation is absolutely essential to feed both the children and the wars.
    What is NEEDed is as said by the Dork.
    Debt-free money creation – denuding the taxation rhetoric.
    It is ultimately available through a Bill presently before the Congress as HR 2990.
    http://kucinich.house.gov/uploadedfiles/need_act_final_112th.pdf
    Why are we not discussing that option?
    Thanks.
    For the Money System Common

    • Mark Robertson

      @ Joebhed, you mention debt-free money creation, and you ask why we are not discussing that option. The reason is that H.R. 2990 would be revolutionary. It would bring great prosperity to average Americans. Therefore it will be allowed to die.

      In 2010, Kucinch introduced the same billas H.R. 6550, and got no co-sponsors. It died when the 111th Congress ended on 3 Jan 2011.

      On 21 Sep 2011, Kucinich introduced it again, this time as H.R. 2990 (National Emergency Employment Defense Act of 2011). He got one co-sponsor (John Conyers), and the bill was referred to the House Committee on Financial Services, chaired by Rep. Spencer Bachus [R-Alabama] who has sat in the bill in order to kill it. When the 112th Congress ends on 3 Jan 2013, H.R. 2990 will die, and Kucinich will retire from Congress.

      At least he tried.

      On a different note, I find it amazing that some reader comments (above) try to rationalize Greenspan’s lies and contradictions.

      • Thanks.
        Solving for the political part is definitely the most difficult, especially among money-abhoring progressives
        But the game is not lost by a failed at-bat.
        Being in the game and having this truly revolutionary piece of legislation drafted readies the next inning.
        I don’t know if its true or not but my Dad told me that Marx was once to have said that Revolution was 90 percent opportunity. Not that Marx was right about anything. Maybe my Dad made it up.
        No matter. It rings true.
        As a monetary reformer, he prayed that the world would advance to the point that a Kucinich Bill would be available when the time came that the unsustainable, debt-based ponzi-scheme known as fractional-reserve banking imploded.
        It is the debt-based system of money that is insolvent.
        You cannot build either financial or economic stability on an unsound monetary system.
        The national monetary system has been corrupted by this financialization, i.e.e debt-takeover, of the economy.
        It’s not like we have a lot of choices.
        The opportunity is knocking.
        Did you have something in mind?
        Thanks.

        • The national monetary system has been corrupted by this financialization, i.e.e debt-takeover, of the economy.
          It’s been corrupted as a result of the ignorance of the population. We have no one but ourselves to blame.

          You cannot build either financial or economic stability on an unsound monetary system.
          We don’t have an unsound monetary system. What we have is perfectly sound, and can be changed for the better. But, we have operators who know how it works and can therefore take advantage of it , because those who don’t know how it works (the general population) refuse to find out or refuse to believe it. So we don’t regulate where we should. We don’t insist that the fed govt loosen the pursestrings to get infrastructure and other govt things going. We’re easily massaged with inane economic platitudes delivered by by MS in Economics Hannity, O’Reilly, and Petersen. We don’t show up with baseball bats at our congressman’s office. We’ve lost our will and our way.

          • To say that the monetary system has been corrupted by public ignorance, and not the financialistas, is to deny that corruption happens when it is purposed by someone’s gain. These days, those someones are the investment and shadow bankers who have created both the unworkable institutions known colloquially as TBTF, and their disgusting myriad of un-payable claims against our national economy; futures of this and derivatives of that.
            The secrecy and complexity of their methods makes effective regulation impossible, which is what makes this entire corrupted system unsound.

            However, after saying that the system is corrupted by public ignorance – making it the people’s fault – you say the system is “sound”. Your description of the ‘sound’ monetary system – again advantaged to the ‘behind-the-curtain’ operators, coupled with impossible regulation, and ignored by the work-a-day general public, sounds pretty unsound to me.
            But all of that ignores its systemically-defective feature – that of privately creating money as a public debt.

            It has been systematically defined as the pro-cyclical, boom and bust system of money, with calls for economic stability brought about by reforms to just this system of money.

            I agree that there is a great need to overcome public ignorance about money. The heroic figure of Hyman Minsky in the mid-90’s called for a new National Monetary Commission to try to work out our exit strategy.
            Perhaps your baseball bats to Congress-peoples is a better solution.

          • Co-signed.

            Our 99%ers believe in their heart of hearts that their tax dollars pay for stuff at the Federal level. These minions need to be disabused of this notion.

            I think MMTers should, therefore, start the monetary revolution with the mantra, “Your Federal Taxes Per Se Don’t Pay For Anything.” (Or something similar)

            Then, in terms a fifth grader can understand, describe why this is so.

            The more often this blogged, headlined, used as a reply, etc. the more likely folks will begin to ask, then why are we taxed?

            • And your answer will be? Because I think that is an obvious question and methinks one ought to have a good answer, or is the answer the same in both MMT and neoliberal schools – “get rid of all taxes!”

              If taxes aren’t necessary for revenues – are they necessary at all, and if so, is the reason based on “economic” or “political” considerations, and if the latter, how can any party expect to make those arguments and get elected?

              I really want to know this stuff, because to defend a system one has to be prepared for all arguments that can be made against it – a defense that says “oh that’s silly” doesn’t cut it, because there are a lot of well meaning, not stupid, folks with whom these “silly” arguments, in the absence of adequate (and by that I mean in terms of their own understanding) refutation carry the day …

              If you want these ideas to be more than wall paper or dissertations suitable for framing, IMO you need to get people in positions that make law and policy to adopt them and to do that you need to get them elected and to do that you need to get folks to vote for those them and to even begin to do that you need to get folks to LIKE the ideas, and for them to do that – they have to be able to understand how, at the very least, these ideas can fit comfortably into their world view, i.e. without turning the whole kit and kaboodle upside down … Is there a “transition” plan in here somewhere ?

              The idea that we don’t need taxes for revenue is sooo far off the radar screen for most people that the tendency will be, even in the face of obvious benefits to that idea, to reject it, as in “wouldn’t that be nice, IF it were true …” simply because, if it is true, the implications are “mind boggling” and folks don’t like to get their minds boggled TOO much – too much cognitive dissonance IS a bitch and even “truth’ will be rejected if it is too jarring …. You really are asking a lot here – and methinks one ought to recognize that …

              It seems to me that this is, indeed, about a lot more than “just” economics so i wonder if starting at a very basic level would be useful – I am not sure exactly what that would look like, but do you guys ever just sit down with a bunch of average Joes and Jills and and see “what works”?

              • Aquifer, good questions. The answer to why are we taxed is that’s how you establish the value of fiat currency in a society that has agreed to be a self-governing entity, to create the need for it.

                The government needs to provision itself (military, workers, farmers, resources, etc.). It needs to hire people and buy resources. Why would anyone work for the government [think back to 1776 ;-)] or give up its resources to the government initially? No need. The government imposes a tax with a penalty to create in the population the need to get the currency to pay the tax. The currency of account in any country is the legal tender, the only money, that the government will accept for taxes, so you ahve to work to get it.

                In olden days, Kings would enslave people to provision itself, or as Warren Mosler says in the link below, knock you over the head with a bottle while you were out drinking the night before and haul you away.

                But we’re more advanced–;-)–and a fiat currency uses a tax to create a need for the money. The government issues the currency, and then creates a tax to establish the need for that currency. it’s just that simple.

                Listen from 1:48:00 to 1:55:00 at this link. It starts a little early but that’s ok. It’s the Q&A part of the talk. You should listen to the whole thing when you have the time.

              • This is to MRW

                The ‘taxes-driven-money’ construct doesn’t sound right, from a lot of perspectives.
                It is more than counter-intuitive this idea that the reason we pay taxes is so that the government can keep the ‘money system’ in place; no taxes equals no money system.

                From the taxpayers perspective, it seems to be all about paying taxes for supporting the government’s budget, including its debt-service payments.
                Were there no need for taxes, could we then not have a national money system?
                Of course we could.
                The nation is sovereign in its monetary power.
                That is all you need.
                If the monetary system must serve the national economy, then the government must make laws that provide for such service.
                Monetary sovereignty and independence and rational legal tender laws are all that is needed for everyone to use the national money system of exchange. It’s our money system.
                Whether it is possible or not to have the government create all the money that is needed for the national economy, without taxation, is only of theoretical interest without discussing private money creation in the same breath.
                Today, the government must obtain its funding from existing monies, either through taxation or borrowing.
                Today, people must pay taxes to support the actions of their government, either directly or for debt-service.
                People pay taxes because they have to – at least until we change this system.

              • MRW – so we pay taxes, not because the gov’t needs the money but in order to fulfill an obligation that the gov’t says we owe it and if we don’t pay up we “get whacked up the side of the head” or some such and the gov’t does this to make sure that we accept the money it pays us for rendering services to it, which services it appears are actually services it renders to us, which is why we have a gov’t in the first place, I suppose …. hmmm, ok – sounds practical if a bit loutish, but how does that lay any kind of basis for determining how MUCH we owe – THAT we owe, OK , but how much? You have explained why a particular currency has any value at all (we need it to keep from getting whacked up the side of the head) but not, as far as i can tell, why any more than a token tax might be necessary … to make us work harder or longer or ?…. Is this where we get into the use of a tax to reduce inequality? But that is not, strictly speaking, required by “economic” considerations, is it?

                I know it sounds like I am mocking – but i am not – this sounds a bit strange to me and, in just about any system, I have found the devil is always in the details … and i guess i need a few more of those to figure this out ,,,,

              • @joebhed

                This is where you’re wrong: “Today, the government must obtain its funding from existing monies, either through taxation or borrowing. Today, people must pay taxes to support the actions of their government, either directly or for debt-service. People pay taxes because they have to – at least until we change this system.”

                100% wrong, respectfully.

                Read Mosler’s “The 7 Deadly Innocent Frauds of Economic Policy.” It’s free here:
                http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

                The search this site for Stephanie Kelton’s two part article on “What Happens When the Government Tightens its Belt?”

                • Thanks.
                  I hope we can stick with this point, MRW.
                  How about if we agree on what is at stake here, before we engage the issue.
                  Either we must change the existing laws, or not.
                  One of the tenets of MMT is its completely unnecessary extrapolation from monetary sovereignty – which empowers all governments to operate their money systems as they see fit – to the allegation that these full sovereign powers powers are in effect today.
                  Here’s a clue. Just joining the IMF places a check on monetary sovereignty.
                  As a result, rather than MMT identifying and working hard to repair what is needed to achieve full monetary sovereignty and independence, MMT makes claims that these things are in effect today.
                  They are not in effect today.
                  IF NECESSARY, I will produce quotes from Mosler and Wray that in fact they are not in effect today.
                  I will quote from Wray’s NEW book on how they are not in effect today, and how the Treasury MUST have a positive balance in its TGA account prior to spending any money – and how that positive balance must come from either taxation or debt-issuance.
                  I am not talking about modern monetary THEORY, I am talking about modern monetary FACT – as defined in law and as in practice.

                  IF the government doesn’t have the power – again because of the existing laws, regulation, policy and practices – to just pay for things needed to achieve our common objective, being either nominal full employment or a living wage economy, then, we have to be lining up the changes to our existing monetary framework that will allow us to do so.
                  For some reason, MMT does not want to do that.
                  Despite the fact that Lerner called for ‘printing money’ as needed to achieve the public good, the SOLE action propounded by only some MMT advocates in favor of the “printing money” equivalent is the Platinum Coin school of MMT.
                  That Platinum Coin provision was stuck in the 1996 Omnibus Budget Bill and never debated.
                  THAT it can be used to create $Trillions thus remains debatable.
                  I wish it could, but my confidence level is a little less than medium.
                  And, what if they had never planned to make a Platinum Commemorative Coin in 1996?
                  Would, then, the government have the power to do the ‘money-printing’ that Lerner called for?
                  From where would they get the authority?
                  Please understand that what is written in Warren’s book is Warren’s opinion.
                  And anyone’s understanding of what it really means is dependent upon their previous understanding of how the system of government finance actually works.
                  What Warren wrote didn’t change anything about the existence of the rules of government finance.
                  And so I repeat what I said:
                  “Today, the government must obtain its funding from existing monies, either through taxation or borrowing…….. until we change this system.”
                  Respectfully.

              • @ what are taxes needed for if not to fund the federal government?

                Language can be so tricky :)

                (I think) I’ve read Warren Mosler describe it like this: taxes “make room” for the currency sovereign to spend without causing demand-pull inflation. I think this is the best way to think about it. Unfortunately it’s only slightly less abstract than the notion that taxes are needed to maintain value.

                The world of nuance and inexactness is not conducive to politicking.

              • @Aquifer,

                Well, if the economy is ice-cold, the way it is right now with so many still out of work, and sales are down, then why tax? As MMT explains, you use taxes like a thermometer. If cold, cut the taxes. If the economy is too hot (everyone employed, products and services flying out the door, no one can keep up) then you cool it by draining dollars from the economy: taxes. There’s no one rule. It depends on two things, basically, sales and employment. I mean, we’re a capitalist society. No sales means no one is spending. No spending means there’s no income. No income means there are no jobs. No jobs means there are no sales. Etcetera.

                So you asked: “Is this where we get into the use of a tax to reduce inequality?” That’s not what a tax is for. If POLITICALLY everyone wants to the tax the rich, or say that every 30-35-year-old doesn’t have to pay taxes while they fill their bank accounts,or no blue-haired people have to pay tax, that’s one thing and that’s a political decision. That’s social engineering. But it does NOT describe how the monetary system works at a federal level. So don’t confuse the two.

              • @Aquifer, JK, joebhed,

                Try listening to Warren here at the tail end of this interview:
                Warren Mosler on the Nicole Sandler Show.
                http://radioornot.com/site/?p=5485

                Start at 1:32:30.

            • Mr. P. Oracle, yes, as a minion I do (did?) believe that tax revenue is used to “pay for” the things that the federal government places in its budget. It is clear that this household finance model has been the natural way for the unwashed masses to understand the finances of the federal government, whether we have been taught this somewhere, or most likely simply extrapolated from our narrow personal view in the resounding absence of an accurate presentation of the current monetary mechanism. So it is with gratitude that, through Harry Shearer’s interview with Prof. Kelton, I am learning something of how it works. Yes, all of you MMT experts: please explain this stuff at a 5th grade level. I’ve got a PhD (in science!) yet it pisses me off to no end that this stuff is hard to understand… but i’m now convinced that it is confusing not so much by nature as by design. If someone wants to explain it, and is competent, they can do it using jargon-free language, with a glossary of terms if necessary, a few pictures with arrows and labels would surely help, and offer citations where one can go to get more info. SO: why do we continue to be taxed?

              • @Minion99,

                I understand how you feel: “please explain this stuff at a 5th grade level. I’ve got a PhD (in science!) yet it pisses me off to no end that this stuff is hard to understand.”

                It’s taken me two years, and I’m still making mistakes. But stick with it. the pennies drop.

                (1) Watch the video I posted above at November 18, 2012 at 6:22 pm.
                (2) Read the two-part article that Kelton put up on this blog : What Happens When the Government Tightens its Belt? You might have to search with these terms: Kelton teeter-totter
                (This is one where you do have to pay attention, but it was the breakthrough for me. The big ah-ha.)
                (3) If you want the inny-outy on the Fed, download Mosler’s free revised Soft Currency Economics II for a Kindle or Kindle Cloud reader from Amazon.

                Look for my name above and check out the other links.

    • I’m not a fan of war, not by any means, not even close.

      But the Govt does not need either taxes or “borrowing” to pay for wars. Bush didn’t. They just did it “off-budget”. When it was politically expedient to do so, the Bush spending was put back ON budget to scare everyone.

      In the meantime, Bush and Rummy dramatically increased the cost of war by outsourcing to cost-plus contractors what the Army used to do. Likewise, Bush ordered Medicare — which is supposedly facing insolvency — that it’s barred from bulk negotiations of drug prices, unlike insurance companies and even the VA which *can* and *do* negotiate pricing. There was no effort to be frugal or even sound.

      Medicare is not insolvent, as Greenspan explained, but Bush’s “reforms” to cause costs to dramatically rise will make it *seem* closer to bankruptcy, for people who don’t pay attention.

      • Thanks.
        Agree about War and about Medicare and about privatizing both of these.
        But, sorry, even for off-budget expenditures of ANY kind – the government NEEDS the positive balance in its TGA account BEFORE it can pay for anything; thus debiting that account balance and crediting the Payee’s account.
        Please do not confuse the budget with the government’s payment system.
        In the case of the off-budget war’s expenses, they were pay-as-you-go.
        The budget accounting came much later, but it all adds up the same way.
        Thanks.

  15. Time for Michael (Huckleberry :-) ) Hudson to fire Greenspan again. Hudson should replace the Donald and have a program firing another pseudopod of the Washington/Wall Street Blob every week!

  16. Geez, just as the motor skills of the human deteriorate through time, so, too, does intellectual capacity. Crazy Al doesn’t know if he’s afoot or horseback. It demonstrates one of many drawbacks to representative democracy, incumbents get elected to office even though they’re superannuated incoherents, ie. Strom Thurmond, Arlen Specter, Richard Byrd and Nancy Pelosi, or those that receive lifetime appointments courtesy of these fossils, Ruth Bader Ginsburg, for example. Naturally these doddering old fools are now incapable of making a reasoned decision themselves, if they ever were, so their myrmidons and sycophants make them in the name of the anointed. Only a relative handful know the names of those clerks that whisper advice in the ear of Ginsburg, that determines the outcome of confrontations that will influence the lives of innocents for decades to come. There’s zero reason to listen to anything Greenspan has to say.

  17. Greenspan, like most conservatives, is worried that inflation will hurt living standards. Nowhere in this interview does he say the USA is “running out of money”. When a conservative says we can’t afford to run massive entitlement programs forever they’re saying that the US government can’t afford to spend all of its resources on entitlements when there are other pressing matters.

    MMT seems to think we can just print as much money as we want to meet all of society’s needs as if there will be no repercussions. But there isn’t a single dynamic model by MMT advocates describing how, why, when inflation might become a problem.

    If you’re going to criticize people for “not understanding” you might want to actually create a dynamic model explaining why inflation won’t hurt the US economy when they’re spending 300% of GDP on defense, entitlements, etc. Until then, MMTers just sound like the debt lunatics who can’t explain why the USA isn’t going bankrupt. And no, screaming “Japan” (which is a complete apples and oranges comparison to the USA) is not a defense.

    • Assuming no credit debt, the monetary sovereign should be able to create new money at the rate of real economic growth without price inflation. Example: The real economy produces 5% more products so the monetary sovereign should be able to produce 5% more money to purchase them with without prices rising. But with credit debt, the monetary sovereign maybe able to spend even faster than the real economic growth rate without price inflation since the repayment of credit destroys it. Thus if new credit creation is less than the repayment of existing credit (plus some fraction of the interest unless all of that interest is spent rather than saved) then defict spending by the monetary sovereign is needed just to keep the money supply from shrinking.

      • Frank,

        It’s much easier…

        Per MMT, Prices/Price Stability doesnt have anything to do with “money supply” or “quantity of money” throw all of that out IT IS GARBAGE … all prices are “necessarily a function of the prices govt agrees to pay for things or the prices the govt allows it’s banks to lend against things”…. rsp,

        • all prices are “necessarily a function of the prices govt agrees to pay for things or the prices the govt allows it’s banks to lend against things”

          It might serve some purpose to broadcast such blather but if one personally believes it it’s the epitome of delusion.

    • I was handing out political flyers not too long ago and got into a discussion with a guy who, when I tossed out this idea brought the inflation thing up and said “look what is happening already – inflation is up” and he could point to how much more expensive things are now than they were – shucks, I couldn’t argue with him there – so the idea that we are “nowhere near” having to worry about inflation because demand is so low with folks “deleveraging” (for crying out loud, why can’t we just say because they are broke…) may make sense in terms of a theory or formula, but doesn’t make sense to the man in the street … “Good heavens, inflation is bad enough now – what a disaster if the gov’t throws some more money out there!” Now i am sure MMT folk can explain to each other why this is bogus – but can you explain it to the man in the street?

      • Perhaps this is an issue of “demand-pull” inflation and “cost-pull” inflation. If there is no demand, there can’t be demand-pull inflation.

      • Try this:
        If gasoline and other prices shoot up due to an anomaly like Hurricane Sandy or Katrina, no one should call that “inflation”. Likewise, if these record droughts the USA is experiencing in the food belts pushes up food prices, that should not be called inflation, either. A reasonable person should have their interest piqued by that. (I guess that’s cost-push.)

        So what is inflation? Demand-pull inflation, where consumer demand plus govt demand (including money given to Soc Sec recipients and other aid) is attempting to beat Supply, attempting to buy more than the market is providing and more than the market can even *expand* to provide, including if there were some limitations of resources or workers. The MMT guys like Mosler and Wray and also Keen have acknowledged the existence of possible factors like energy shortages and climate change on Supply.

        What about when the Financial Modernization Act, the Commodity Futures Modernization Act, and other acts of Enron-accounting and de-regulation sponsored by Phil Gramm and the like have been allowed to saturate Futures Markets in energy and food, where instead of 70% buyers and 30% speculators (to add some liquidity), we now have 70% speculators (who will NEVER take delivery of the product) and 30% actual buyers?

        I would place these anomalies of economic policy insanity in the category of natural disasters like a hurricane, vs. the demand-pull of “government spending”.

        I read one article on how Goldman-Sachs created the first “food futures index” that was responsible for driving up wheat and other prices by bidding on food that did not exist, in order to generate a profit for themselves and their clients in their index fund. The regulators who were charged to limit the participation of gamblers, changed the rules and/or quietly looked the other way while Wall Street took over.

        I read another few articles by the more mainstream economic historian (and conspiracy theorist) F. William Engdahl who explained in the mid-2000s how oil prices are set. Not in Saudi Arabia, but at futures markets in NYC and London, where speculators can buy “paper oil” with 6% down and thereby drive the global spot market to price oil NOT at Saudi Arabian cost levels, but at the fictional price of North Sea and East Texas oil, even if that’s only a fraction of what’s being pumped.

        Then there’s more spot markets and manipulation for *refined fuel* (gasoline) prices in the USA, which is different from oil prices.

        Esteemed Corp Law Professor Lynn Stout, in a forum with William Black, explained that laws going back to Aristotle and maybe Babylon blocked Markets in real goods from being dominated by “gamblers”. She defined “derivatives” and “taking a position” as simply “bets”, one counter-party vs another counter-party, a win-lose type of investment, in contrast to what we normally think of capitalist investment, a win-win event.

        It is FALSE (but a clever propaganda trick) to point to a market obviously driven by speculators and Wall Street cash and credit —- point out how energy prices are not just “high” but instead gas pump prices jump 20-30 cents or more up and down every few days or weeks, which I don’t recall in the past that prices moved more than a few pennies at a time to reach a new plateau — and then try to blame that on GOVERNMENT SPENDING pushing up demand higher than what energy markets can provide.

        That’s right wing B.S., on purpose.

    • Thank You Skeptic, for raising the issue of a model… but I cannot believe that there is no model within the MMT that relates monetary supply (how much $ has been printed) to the inflation rate (and thus, presumably, to the buying power of the dollar) with whatever other factors are relevant, e.g., GDP, population, trade balance, interest rate, etc. I want to know what knobs are available to turn (policy decisions) and how those relate to the tradeoffs we must presumably make as a society. We need to distinguish between productivity (of tangible goods, labor, etc.) and fiscal transactions which may simply be exchanging of IOUs that do not actually accomplish anything (derivatives, and securitized debt, and other forms of gambling). We also need a metric for “inflation” that corresponds to the cost of living, and not to the core inflation number that is touted as 2% or less. The man in the street

      Please MMT: We need a description of monetary theory that can be converted to an equation, so that we can see for ourselves what the impact of printing more money is, for example. Then we can be better prepared for listening to the punditry, and voting on policy choices. Otherwise, fearful lemmings will shy away from the cliff’s edge, only to find out later that this choice led to serfdom.

      • The first comprehensive systems dynamic model of direct public money creation and its effects on economic performance was done by Dr. Kaoru Yamaguchi of Doshisha University in Japan a few years ago.
        Here is a link to his paper which discusses the effects of his open-macroeconoic monetary system modeling.
        http://www.old.monetary.org/yamaguchipaper.pdf
        His model is available for analysis and discussion.
        But a major caution.
        Dr. Yamaguchi was not modeling the MMT construct of government finance.
        He was modeling a change to a government-issue public money administration – where the government actually IS the issuer, and not the user, of the currency.
        This is a reform proposal that replaces the MMT endogenous money paradigm.
        But the questions of inflation and government money creation are relevant and informing.
        It puts an end to debt-based money.
        It provides for economic growth.
        Without inflation or deflation.
        The model works just fine.
        It is based on the construct that money is not debt.
        MMT’s understandings is that money is debt.
        Which it is not.
        For the Money System Common.

        • I believe I know semi-comprehend the point — not a model or system — that ALL money is simultaneously a debt and an asset, and has always been thus, because money is based on accounting (NO SUCH THING AS COMMODITY MONEY, THAT’S BARTER) and in accounting, every asset listing corresponds to a liability and vice-versa.

          This holds true in the private economy sector, when we think of banking, and consumer assets being bank liabilities and vice versa.

          Then this also holds true in the bridge to the public sector, the Fed Gov, where banks take customer deposits and place them into Securities accounts at the Federal Reserve, aka they purchase “govt debt”.

          Therefore, the deposits that are customer assets and simultaneously bank liabilities, when the bank “lends” these to the Treasury (which has no real need to “borrow” except statutory, Congress), this becomes the banking systems assets and the Govt’s liabilities. And the Fed + Treasury can PAY back ANY liabilities it owes. After all, it only accepted CASH (Federal Reserve Notes) from it’s bank-agents and converted that to BONDS (Treasury Securities-Notes), and so it can and does convert one kind of note back to the other kind at will, with certain rules and contracts, like the “term” of the Security.

          I believe that a few tries at personal correspondence with Warren Mosler about Steven Zarlenga convinced me that the “debt free money” that he was pushing along with the Kucinich bill comes from a false paradigm about money.

          However, Zarlenga is obviously correct to me that when we are dependent for MOST of our cash on the banking system, which effectively charges a monthly FEE to “rent” it’s money, that is inferior and undemocratic compared to Government Deficit Spending where the money we use carries NO monthly interest or fees, EXCEPT those which the Fed chooses to set and hand out to banks and other investors via the interest rate paid on T-bonds or on Reserves.

          My conclusion, roughly understood, is that we don’t need an entire complicated systemic change today. All we need is a new correct understanding of money and fiscal policy such that politicians and people don’t FREAK OUT about “government spending” and instead view it as a welcome alternative and at least a supplement to “renting” money from the banks, and at random and fluctuating costs on top of that (interest rates on credit cards that are both usurious and unstable, can suddenly jump many percentage points).

          (Funny that they can complain about the “economic uncertainty” supposedly caused by Obama and questions about tax policy, also a real concern, but no concern whatsoever that banking non-regulation permits interest rates all over the place to destroy the liquidity a business might think it has, and the liquidity and disposable income of consumers.)

          From there, there’s more proposals such as Warren Mosler’s proposals to reform the Fed, Treasury, and banking system, and Michael Hudson’s and Steve Keen’s proposals on the necessity for a Credit Writedown or Debt Jubilee, because the private sector debt overhang is suffocating the economy and increasing risk and instability in the system (Keen, Minsky) and because the rate of compounding interest threatens to swamp productive progressive capitalism and create debt-serfdom (Hudson).

          • @ Gary Goodman
            Thanks.
            Lots there.

            “”I believe that a few tries at personal correspondence with Warren Mosler about Steven Zarlenga convinced me that the “debt free money” that he was pushing along with the Kucinich bill comes from a false paradigm about money.”"

            I am pleased to hear of your correspondence with Warren about Stephen Zarlenga, author of “The Lost Science of Money”. Could you please explain exactly the “false paradigm about money” that Warren’s convinced you of?
            And, do you still have the correspondence?

            More later.
            Thanks.

          • @ gary Goodman
            I should probably just leave you to your semi-comprehension of what it is you see as the point. I certainly do not see that point. My impression is that MMT has evolved by collecting about half the pieces of the global monetary puzzle, and it does a great job of championing each of those pieces without ever creating a discernible picture with a whole puzzle.

            Starting at the end – from Hudson’s correct identification of the problem of compounding interest. This is a problem caused by the endogenous money system that MMT champions. All money is created as a debt. All money is a debt that over time collects compounding interest. Think of the compounding interest that was saved by utilizing public-money Greenbacks that stayed in existence without debt for 125 years. If you really want to understand the depth of the compounding-interest problem, have a listen to Dr. Bernd Senf of the Berlin Economic School here.
            http://blip.tv/file/4111596

            Once you do, you will realize that it is a problem that MUST be fixed and that cannot be fixed without eliminating debt-based money.

            The Keen-Minsky link is quite transparent. Minsky came around to understand the importance of the Simons – Fisher – Friedman proposals for full-reserve banking. See Minsky’s October 1994 Working Paper No 127 at the Levy Institute – Financial Instability and the Decline(?) of Banking.
            http://www.levyinstitute.org/pubs/wp127.pdf
            He advocated for a new National Monetary Commission with public money on the table. Neither public money nor full-reserve banking has any currency in MMT.

            And Keen’s “modern” debt jubilee proposal is a far cry from the historic efforts at correcting the money-as-debt construct. He proposes that the multi-$Trillions bailout be funded by additional government debt. And there is no return of real assets from the creditor class as there was historically.
            If Keen were adhering to MMT, he would not propose multi-$Trillion s of additional government debt. The IMF’s paper on the Chicago Plan Revisited joins in breaking today’s debt-saturation paralysis, but does so using the seigniorage created by monetizing private bank-credit as it resorts to full-reserve banking.
            http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

            Mosler’s reforms are a decent start, but they leave in place the private creation of money as debt, and they never restore the sovereignty over the money system to the people.
            I sense some lip-synching on a number of Mosler’s talking points – notably that there is no need for systemic and structural reform. I hope that you know exactly how and why these claims are true for yourself, and are not simply convinced by Warren’s unique artfulness.

            I am not so convinced. All of those solutions go to symptoms of the problem, be they debt saturation, compounding interest, financial and economic instability or even vast wealth disparity. The cause for all those symptoms is common, and systemic. The cause lies in the debt-based system of money.

            Do all that Warren and MMT proposes, and the grandkids will be back here doing this all over again.
            Thanks.

    • Yes I’d like to have a model of inflation too. But in the meantime, I think Stephanie, Randy et al want to convey the key concepts to everyone who will listen. And at the current time, inflation is just a non-issue right now given low rates of capacity utilisation and high unemployment.

      I’m sure Stephanie, Randy et al are working on that model, but just because there is still work to be done doesn’t mean it can’t make a contribution right now

      • Methinks inflation is not a “non issue” for those on fixed/low incomes who find they are paying more and more for everything and for whom the idea of putting more money into circulation, while sounding encouraging on the one hand, says “Inflation!” on the other; s0 although it is a “non-issue” in this modeled scenario, folks perceive it as a real issue in the real world and for the ideas to be accepted they must deal with this real world perception ….

        I am not saying they can’t – i don’t know if they can – all i am saying is i think we need to hear an explanation of how they do ….

        • Why not raise reserve requirements to keep pace with the new reserves created by Federal deficit spending? And forbid the Fed from creating any more reserves for the banks? That should at least keep the banks from inflating the money supply thereby leaving the Federal Government a lot more room to defict spend without causing price inflation.

          • Because banks do not create loans out of reserves. That’s not modern banking.
            Reserve requirements are like a “tax” on banks, per Mosler, with the profits going back to the Treasury (which does not need profits).

            Warren told me to just remember that Canada has zero Reserve requirements on banks by it’s CB.

            Then I learned that the USA exempted all but consumer deposit accounts from ANY Reserve requirements, no Reserve requirements for commercial accounts.

            On top of that slack, Greenspan added a gimmick in the mid-90s called “Sweeps”. Banks can temporarily shift or “sweep” all their checking account balances on it’s books into Reserves, for a few hours over night, when they do their rectifying or whatever that’s called, so the bank has sufficient Reserves to operate and meet legal requirements, then the banks “sweep” that money back into checking accounts — all LEGALLY — and everything is fine. Banks essentially “borrow” from their customers “demand deposit” accounts, interest-free, overnight, to rectify or slush-ify their reserve and clearing processes.

            Then I also learned how the rules are set, such that banks first create loans, and then on Wednesday look BACK ONE WEEK for any Reserve shortages. If any exist, the banks have ANOTHER WEEK to rectify such shortages by borrowing (interbank) from other banks with surplus Reserves at the Fed, or from the Fed Discount Window, and maybe from another source I don’t recall.

            So US banks operate TWO WEEKS in arrears from the creation of Loans + Deposits to rectify any imbalance or shortages in Reserve requirements, which the Fed can change at will. Banks don’t check their current Reserve balances when a customer applies for a loan.

            ==>> The Reserve balance at the Fed is therefore irrelevant to loan creation. <<==

            The Fed Gov has PLENTY of room to create money via deficit spending (today) without spurring inflation. There's some hypothetical time in the future when Federal spending COULD outstrip Aggregate Supply, but right now the USA and industrial nations is sooooooo far from that level it ain't funny. What has happened is, a CHRONIC state of Recession called "jobless recovery" (a propaganda term) has become the "new normal". So in the same sense, mass U6 unemployment and mass poverty has become the "new normal". The gap between current conditions vs. full employment vs. the kind of saturation that would begin to threaten demand-pull inflation —- 1-2% real unemployment perhaps — is HUUUUGE.

            (But the Fed and politicians and Wall St and their pet economists are really only concerned about one kind of inflation — WAGE increases that they claim will push up prices. They have not the slightest concern about other situations they create on purpose which DO push up prices on top of stagnant wages, but then they LIE and claim in their punditry that spikes in energy etc. is caused by the Govts "printing press" and by "environmental regulations" that limit supply — never mind that energy companies have conspired to shut down refineries, etc., and refuse to open new and cleaner and safer ones, and what Enron did to spike electricity.)

            In the last decade, the banks FLOODED the economy with money, in the form of housing and comm real estate loans and equity lines of credit, dramatically expanding the money supply without causing much general inflation or even a hint at fear of hyper-inflation. There WAS narrow targeted inflation — as intended by the banks and the CDO/derivatives market — in real estate prices which began to double every few years. This was touted as a "free market solution" to poverty and homelessness.

            Michael Hudson points out this is land-asset price inflation — LAND goes up, not the property built on it. That is NOT "general inflation".

            Of course that level of credit did "seep out" into general consumer spending, supporting demand by consumers whose wages have stagnated for decades. Did that cause any "inflation"? I learned that CPI is the wrong place to look. However, Bush allowed speculators to drive up fuel prices dramatically (these crashed back down just before the inauguration, so that wingnuts can say Bush gas prices were $1.50 compared to now under Obama).

            So consumers were able to continue to purchase consumer goods, computers, electronics, etc. without the heavy push to "discount" markets and bankruptcy sell-offs that has occurred since the Crash. I suspect this unofficially busts the official CPI. The CPI is also phony, because I think it partially excludes ENERGY and FOOD, two very critical commodity markets which are dominated by Wall St. Have to check Shadow Govt Statistics for that. (I also read that one time G. Herbert Walker Bush leaned on Compaq to post expected computer sales that had not yet transpired to artificially lower the CPI, since computer and electronics prices tend to drop vs commodities like food and other durable goods, thereby attempting to give him an advantage vs Clinton.)

            In other words, I suspect that the CPI will look at "how much do brand name computers, Laptops, and pads cost from Dell, Lenovo, Sony, Apple, etc." and at retail outlets but not count the prices for Androids at Big Lots or Tiger Direct or other discount retailers. Plus what about those rebate specials? The "price" is the same, but the bottom line prices that consumers end up paying — and is there free bundling of Internet or other goodies, or is that extra? — may be higher or lower than the listed "retail price".

            I don't know how CPI handles the difference between brand name prices and meat/veg/milk prices at major supermarkets, vs. discount and "off-brand" and "generic" prices at stores like Save-A-Lot and Aldi's (in Ohio) and a few Amish stores with much cheaper prices on bulk veg and meats, and also in contrast to more premium "yuppie" stores where there's more carpeting and a more exotic deli counter.

            Mosler has been asked many times about how to tell if there's a shortage in deficit spending. If there's still people in the unemployment queue, people who want jobs but can't find them, then deficit spending is too low.

            In the early 70s, a skilled or even unskilled laborer could quit a job in the morning and have another job an hour later. Several older friends remind me of that. One had four new jobs in one day. He also came to work drunk and high. He was smart and could learn some new skills, when he was not wasted or hung over, but he also brought good pot and booze for the other employees, so they covered for him. That was NON-union labor. I suspect that these were the Labor market conditions that Lewis Powell was railing against, a Labor market so tight that business management had little control over the proletariat. So they did their best to kill that, by engaging with the Govt to purposely cause unemployment, fear, and poverty as social control mechanisms. Chomsky quotes Greenspan praising such new developments in the 80s and 90s, the "frightened worker".

  18. Legal systems inverting themselves to secure private property rights