Modern Money and Public Purpose 5 – Money, Democracy and the Constitution

The latest installment of Modern Money and Public Purpose is now online.  This seminar explores the relationship between money and the legal formation of the modern liberal capitalist state, with a particular emphasis on the pre-Revolutionary and early United States.  In contrast to conventional economic narratives that cast money as lubrication for existing forms of exchange, this event highlights the legal and political origins of our modern monetary system, and traces the influence of those forces on the shape of the modern economy.

You can view the video below or view at the Modern Money and Public Purposewebsite by following this link.

43 Responses to Modern Money and Public Purpose 5 – Money, Democracy and the Constitution

  1. joe bongiovanni

    Uh oh.
    Not what we might think.

    Farley – on the early formation of American monetary powers.
    The most important quote by private banker rep Governeur Morris::
    “The monied interest will oppose the plan of government, if paper emissions be not prohibited.”

    Again, not only elimination as legal tender, but PROHIBITED public paper money.
    Rather today we have privately-issued legal tender monies.

    Then at 1:32 in, a postulation from a flannel shirted gentleman who says the private monied interests have won out, and that the most important issue before the assembled is WHO should issue the nation’s money – either private banks as a debt, or the government, debt-free.

    But here’s the real problem.
    All the speakers agree.
    “It’s a huge sovereign issue.”
    This IS obviously the issue for many.

    But not for MMT.
    MMT has a belief system that identifies government spending as public money creation and taxation as public money destruction – with the $TRILLIONS created, issued and circulated by the private banks as some sort of “Also Ran” of the monetary system.

    There’s a honest discussion to be had on these important matters.
    Keep ignoring it at the peril of your ideas.
    Thanks.

    • Money creation should be a total government monopoly. Nothing else will do. To allow any private citizen the right to create money is violation of equal protection. It highly favors the money creators over the rest of us.

      • “But if governments are not allowed to create their money, then all of the credit the economy needs is created by the commercial banks. And when the commercial bank credit creation leads to debt deflation and the government cannot finance the deficit to pay the interest then the commercial banks say: Alright, sell off and privatise your infrastructure. This is what we’re seeing in Greece today, in Ireland. You’ve seen it in Iceland. What you are seeing is a financial grab of infrastructure that is taking place by the ability of commercial bankers to prevent the central bank from creating credit.” — Dr. Michael Hudson http://www.mediaroots.org/mr-transcript-italian-mmt-summit-2012.php

    • “Under industrial capitalism, the idea was that credit would be created productively to fund capital investment that would employ labour. That is not what is occurring today. When commercial banks create credit, it is create claims on wealth. It is create mortgage debt. It is create corporate debt. It is to create personal debt, and student loans, and credit card debt. This is what makes commercial bank credit creation different from the central banks’ creation of money.

      “When central banks create money, they do so for a long-term public purpose. They fund government spending and capital investment and public infrastructure. In most countries in the world, public infrastructure, roads, communication systems, railroads, water and sewer systems have all taken a capital investment that is larger than all the manufacturing capital investment. In the United States, the value of New York’s real estate, alone, is larger than the value of all of the plant and equipment in the United States. The result is: The textbooks that are taught in the United States ignore this difference that we have been talking about. There is a formula, MV = PT. It means an increase in the money supply increases the price level. But the price level that the textbooks talk about are only consumer prices and commodity prices. Nowhere in the textbooks do you find a relation between the credit supply and asset prices, real estate, stocks and bonds. And, yet, 99% of the credit spent in the United States economy is spent on these financial claims. Every day an amount equal to the entire year’s gross national product passes through the New York monetary clearinghouse and the Chicago Mercantile Exchange. The vast amount of payments are within the financial sector. And, within the last ten years or so, all of the growth of bank lending is to other financial institutions.” — Dr. Michael Hudson (http://www.mediaroots.org/mr-transcript-italian-mmt-summit-2012.php )

      • joe bongiovanni

        Thanks.
        Yes, Dr. Hudson’s critique of rentier-capitalism is in perfect square with the works of Dr. Bernd Senf on the root cause of the global financial crisis.
        Both agree the M-O is unsustainable, causes upward mobility to wealth, and result in the ninety-nine percent politic of OCCUPY, etc..
        Both agree that there can only be economic and financial calamity in its outcome.
        It appears that Dr. Hudson is more focused on a Steve Keen type of solution that ties debt-forgiveness(Jubilee!) with financial reforms.
        Dr. Senf is much more clear that the root cause is systemic to debt-based money, and not merely the fault of a few bad actors taking advantage of deregulation of finance and shadow banking’s largesse.
        Dr. Senf’s solution is the elimination of debt-based money.
        As is mine.
        For the Money System Common.

        • “Dr. Senf’s solution is the elimination of debt-based money. As is mine.”

          What you mean is (1) government-issued money that earns zero interest, and (2) full-reserve banking.

          (1) is the same as the MMT proposal that the interest rate be set to zero and that the government not issue bonds.

          (2) is considered by MMT economists to be a bad idea.

          This Levy Institute ebook on banking and monetary reform is worth a read, it includes MMT economists’ analysis and proposals:

          “Beyond the Minsky Moment: Where We’ve Been, Why We Can’t Go Back, and the Road Ahead for Financial Reform”
          http://www.levyinstitute.org/publications/?doctype=27

          • joe bongiovanni

            Thanks.

            “What you mean is (1) government-issued money that earns zero interest, and (2) full-reserve banking.”

            First, I say what I mean. I mean government issued ‘money’ that is issued debt-free. I don’t mean that the ‘money’ earns no interest to the issuer. I mean there is no ‘debt’ associated with its issuance, interest-earning or not. That interest-earning construct is folly. Why would a government issue ‘money’ that earns interest to itself. What free people would stand for such a thing? A loan, yes. But, the national media of exchange? The two are contradictory.

            And I don’t mean full-reserve banking. Reserve-based money is a throwback to the gold standard and is past time to forget about it. Why would a sovereign government-issuance of fiat money need any reserve? Reserve against what? Default? Insolvency? Some proponents from the early reform era (Fisher, etc.) did stay with the then-recent gold-reserve basis for money, but there is no need to do so with electronic token money.
            The concept of reserves for real government-issued money is unnecessarily distracting to the substance of the discussion.
            “(1) is the same as the MMT proposal that the interest rate be set to zero and that the government not issue bonds.”
            First, it is not the same at all. Second, if the government doesn’t issue the deficit-balance in bonds, then from where does the new money come, if not from the issuance of debt-free money?
            There is a soft MMT proposal that government not issue bonds – Mosler and others. But there is a stronger MMT construct that the money quantity be controlled by its market price, and the means for doing so is open-market operations with an active CB. Reformers reject the notion of controlling the quantity of money via its price and favor direct government issuance of the quantity of money. Yes, we agree the real interest rate will be close to zero, but it can be set in a free market with a non-constrained supply. And thus put an end to open market operations by the CB.

            “(2) is considered by MMT economists to be a bad idea.”
            No kidding.

            I will take the time to read that e-book. But my pre-observation is this. Minsky’s Research Paper No 127 called for a new monetary paradigm. It was written after his earlier consideration of the work of Fisher on 100 Percent Money.
            http://www.levyinstitute.org/pubs/wp127.pdf

            His conclusion says that we should consider the separation of the money creation from the banking power (endogenous money)– that we should seek a new monetary structure that meets the needs of a modern progressive democracy, as Fisher proposed.. We’re waiting for MMT to come along.
            Thanks.

            • Randall Wray’s an expert on Minsky, studied and worked with him, and he calls himself a “Minskyan”.

              The ebook is a publication of the Levy Institute ‘Monetary Policy and Financial Structure’ research group and the authors are anonymous, however two of the main authors appear to be Wray and Jan Kregel. The first section on policy proposals is taken from “What Should Banks Do?” by Wray. So if you want a good idea of what his specific ideas are you can just read that:

              “What should banks do – A Minsyan Analysis”
              http://www.levyinstitute.org/publications/?docid=1301

              This blog has links to MMT papers on, and proposals for, banking and financial reform:

              http://mmtinformationservice.blogspot.co.uk/

              • joe bongiovanni

                y
                Thanks.
                Yesterday was a free ride. For some reason about 2PM Verizon decided that our area was in no need for either telephone or these inter-tubes until early this morning.
                My replies will slowly come along.

                This comment about Wray, Kregel and the Minskyan solutions.
                I’ve read Randy’s books and most of Jan’s papers at the Levy Institute.
                I have also read many of Minsky’s Working Papers, and noted above WP No 127 in which he supports the Fisher 100 Percent Money proposal and calls for a new National Monetary Commission for the 21st Century.

                We have to deal with specifics.
                More….

            • “I mean government issued ‘money’ that is issued debt-free. I don’t mean that the ‘money’ earns no interest to the issuer. I mean there is no ‘debt’ associated with its issuance, interest-earning or not. That interest-earning construct is folly. Why would a government issue ‘money’ that earns interest to itself?”

              If the government pays zero interest on base money/currency and doesn’t issue bonds then that money is the same as “debt free” money.

              MMTers would still describe that money as a “debt” however, as that’s how the theory conceptualises money. It would just be a zero-interest zero-maturity “debt”, much like a zero-interest consol for example. Monetary Reformers would instead call it “debt free money” or “equity”.

              • joe bongiovanni

                y
                Thanks.

                “If the government pays zero interest on base money/currency and doesn’t issue bonds then that money is the same as “debt free” money. “ It’s not really at all. But …..
                Ok, so, no bonds, and “no interest on base money/currency”.
                Base money is generally currency and reserves, which themselves are not money but accounting balances between the Fed and its depositories.
                The paper currency is issued into circulation by the private banks and not the government. Coins are issued debt-free into circulation by the government. Whether “the government” pays interest on currency is a confounding machination between each Reserve bank and its member banks – not affecting ‘the government’ until it is using the paper FRB bills.
                Finally, the private FRBNY uses its net interest proceeds that WE pay on government bonds held by FRBNY to, in turn, pay interest on depository banks’ reserves, which reduces the transfer from the FRBNY to the Treasury. So ONLY in that sense does the government “pay” interest on any base money, so-called.
                I know that MMT still ‘conceptualizes’ and ‘describes’ that money as debt, in fact anything that it conceives of as money – because MMT has no ideas of the definition of a debt. It’s like, let’s call an orange an apple because they ARE both fruits.
                I must have missed your reference to ‘what’ money was “a zero-interest zero-maturity “debt”. Did you mean base money again? Currency and Reserves? That’s what I call shoe-horning the legal facts. Currency is a private bank issue, and reserves are not money. The problem with having your own definitions of things like sovereignty, debt and money, is that at some point the discussions have to square with the bigger reality out there. The sooner the better.
                Thanks.

                • “reserves, which themselves are not money”

                  They are money, but as you say they are accounting entries at the Fed. They are sometimes called ‘high powered money’, ‘reserve money’, ‘base money’, or ‘narrow money’.

                  “The paper currency is issued into circulation by the private banks”

                  Paper currency is issued by the board of governors of the federal reserve, which is an agency of the federal government and constitutionally part of the executive branch. The board buys paper currency from the Treasury for the cost of production.

                  Banks purchase paper currency from the fed and then sell it to the public.

                  “Coins are issued debt-free into circulation by the government”

                  Coins are issued by the Treasury, which sells them to the Fed, which sells them to banks, which sells them to the public. You can also purchase certain collector’s coins directly from the Treasury.

                  You’re right that coins are apparently treated as “equity” under national accounting standards. Which is perhaps an inconvenient fact for MMT, although Tymoigne has described it as “arbitrary”. United States Notes, however, are not treated as equity – they are treated as debt, like Federal Reserve notes, even though the former are issued directly by the Treasury.

                  “I know that MMT still ‘conceptualizes’ and ‘describes’ that money as debt, in fact anything that it conceives of as money – because MMT has no ideas of the definition of a debt.”

                  I think this argument between MMT and Monetary Reformists will just go on and on, like a lot of arguments over definitions.

                  “Currency is a private bank issue”

                  No, paper currency is issued by a government agency.

                  “and reserves are not money”

                  Most economists would say they are. Apparently Richard Werner disagrees with most economists for some reason.

                  “The problem with having your own definitions”

                  You appear to have your own definitions too.

                  • joe bongiovanni

                    First, I never get lost in the trees. I have studied the money system for over forty years. We should agree that definitions are a problem, but we should try to resolve the different meanings in light of the claims that are being made by the users of the terms.
                    The big picture for MMT is its claim that in understanding sovereign fiat money, the government creates the money when it spends. This claim is important because we use it in light of the goal of MMT which is to promote full employment, at least. So, if there’s a ‘money’ definition in use that does not serve the full employment goal, then its use is meaningless, and suspect. The same goes for reformers.
                    Aggregate demand must expand in order for there to be full employment. So, in discussing the increase in aggregate demand – we are axiomatically discussing an expanded money supply and increased velocity of money.
                    The quantity of money in circulation is of import as well as increased use and circulation of that quantity of money. If we discuss “money things” that are not relevant to an expansion of the quantity and use of money, then what are we really discussing, and why?
                    Your points….
                    I said: “reserves, which themselves are not money”;
                    Y – “They are money, but as you say they are accounting entries at the Fed. They are sometimes called ‘high powered money’, ‘reserve money’, ‘base money’, or ‘narrow money’.
                    Unfortunately, none of those categories of ‘money things’ have any relevance to the money supply, the use of money, an increase in aggregate demand and employment. So, why do we discuss them as money? They are not legally money, and you can not make them money by associating them with central banking functions under a debt-based money system.
                    “”Most economists would say they are.””
                    One economist I know, the Bernank, says that reserves are not money. From his last Princeton lectures.
                    http://www.youtube.com/watch?v=mWl6JI4KBTg
                    at 21 minutes in.
                    “Reserves are an asset to the banks and a liability to the Fed. They are electronic entries at the Fed. The banking system has a large quantity of them. They basically just sit there. They are not money in circulation. They are not part of any broad measure of the money supply, only part of the monetary base, etc.”
                    As I said above. Any discussion about what IS money, or about what money IS, must have relevance to the public policy discussion. Reserves are not money in the sense that they never leave the CB – Depository interface. They are accounting entries only. You will never hold one, nor will I. They will never stimulate demand. They will never create one job, except for an accountant. To what purpose does MMT call ‘reserves’ money?
                    Y : “”Paper currency is issued by the board of governors of the federal reserve, which is an agency of the federal government and constitutionally part of the executive branch. The board buys paper currency from the Treasury for the cost of production.””
                    Not sure where you learned that, but…
                    The Board of GUVs doesn’t issue anything, and it doesn’t buy anything – it merely sets policy, feebly so. The private Reserve banks issue (sell) the currency into circulation on behalf of their member banks, but only after it is collateralized and becomes more debt-based money. Paper currency is issued into circulation by the PRIVATE Fed Reserve Banks, NONE of which, not even FRBNY, is a government agency.
                    Y – “”You’re right that coins are apparently treated as “equity” under national accounting standards. Which is perhaps an inconvenient fact for MMT, although Tymoigne has described it as “arbitrary”. United States Notes, however, are not treated as equity – they are treated as debt, like Federal Reserve notes, even though the former are issued directly by the Treasury.”
                    First, ALL accounting norms are arbitrary. But, on whose balance sheet are we speaking?
                    Thanks.

                  • “One economist I know, the Bernank, says that reserves are not money”

                    He says they are part of the monetary base. The term “reserves” actually means vault cash + deposits held at the Fed, known as reserve balances. Reserve balances are basically Federal Reserve notes in electronic form. Instead of shipping notes between each other’s vaults, banks settle their payments with electronic reserve balances. They can withdraw their reserve balances as cash, or add to them by depositing cash at the Fed.

                    “They are accounting entries only. You will never hold one, nor will I.”

                    If you hold a Federal Reserve note, its basically the same thing.

                    “The Board of GUVs doesn’t issue anything, and it doesn’t buy anything ”

                    The Board issues notes to the Reserve Banks in exchange for collateral. The Reserve Banks then sell the notes to their member banks.

                    12 USC § 411 – Issuance to reserve banks; nature of obligation; redemption:

                    “Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank. ”

                    http://www.law.cornell.edu/uscode/text/12/411

                    I sent an email to the Fed a while ago on a similar subject an got this in response:

                    “Federal Reserve notes, issued pursuant to Section 16 of the Federal Reserve Act (12 U.S.C. Section 411), are obligations of the United States. These notes are issued at the discretion of the Board of Governors of the Federal Reserve System, and, as provided in 31 U.S.C. Section 5103, are legal tender for all debts. Federal Reserve notes are the chief form of currency in circulation today and, as legal tender, may be used to pay all debts.

                    The Federal Reserve estimates the need for new currency, and the Board orders currency printed by the Bureau of Engraving and Printing and pays the costs of production. The Federal Reserve Banks then place the currency in circulation, in effect selling currency to banks and other depository institutions, as well as, in effect, buying currency back from those institutions. In this way, the public’s changing needs for currency are satisfied. Each Reserve Bank pledges as collateral its assets equal to the amount of notes it has outstanding.

                    I hope this information is helpful.

                    Sincerely,
                    JPD
                    Board Staff”

                  • joe bongiovanni

                    Y
                    Thanks for all of this.
                    It can actually help a lot to clear up the weeds, if we pay attention to the details.
                    First, I am familiar with the statutes.

                    Let’s start at the end – the note from JPD.
                    And let’s recall the issues, at issue, are of whether non-cash reserve balances – that are part of the Mbase – are ‘money’, and whether the cash currency part of our money is ‘issued’ into circulation by the Board of Governors.
                    My position to be clear is that the answer is NO to both.
                    Reserves (non-cash reserves, as cash is part of what makes up reserves in our convoluted scheme of CB accounting – and which here you call ‘deposits’, which I call account balance credits) are not money.
                    And the Board of Governors does not issue currency into circulation. OK.

                    As I said, the Board is a public, policy setting organization. It makes decisions and it directs the policy, which is implemented by others – in this case private bankers. The issuance of the cash-currency is an implementation of the policy set by the Board.
                    The Board is part of the government. But the Board is not the central bank, and is not the Federal Reserve Bank(FRB) system. Were the CB and Reserve Banks public entities and an operational part of the Board, then the FRB’s issuance of the paper currency would be no different from the Treasury issuing the coinage.
                    The Board is part of the government. The government pays its bills.
                    But neither the government nor the Board owns the CB and the FRBs.
                    The CB and FRBs are part of the private sector of the US economy, IN REALITY, though not under the FF accounting constructs of MMT.
                    In GB, The BoE IS owned by and part of the government. It ISSUES the paper currency into circulation. Thus, in England, 97 percent of the money is privately issued.
                    In the US, 99+ percent of the ‘money’ is privately ‘issued into circulation’, and by that I mean, becomes part of the stock of money.
                    In the US, the benefits of currency issuance fall to the private sector. Period.
                    With that proper construct of both policy-setting versus implementation, and a proper “Who’s who” in the money-banking system, it is clear from JPD note that it is the private bankers of the FRBs that issue the cash-currency into circulation, and benefits from same.

                    “”The Federal Reserve Banks then place the currency in circulation, in effect selling currency to banks and other depository institutions,…….. Each Reserve Bank pledges as collateral its assets equal to the amount of notes it has outstanding.””
                    This is exactly what I had said earlier.

                    As to whether the ‘reserves’ are money, your only veil is that it is part of something called the monetary base – also called other things in order to assure sufficient complexity to disguise rather than reveal any truth about it.

                    Rothschild’s famous quote was not: “Allow me to control the monetary base, and I care not who makes the nation’s laws.’

                    Money will serve our desired goals of changing today’s socio-economic paradigm only if, as Lincoln said, ‘Money will cease to be master and will then become servant of humanity.’
                    And that will never happen in the pretend world of MMT, claiming as it does that right now, today, the government creates the nation’s money, while pointing to ‘reserves’.
                    Perpetuating any part of that errant notion by use of meaningless, reserve accounting mechanisms may be honestly well-intentioned but when it persistently and pervasively avoids, rather than informs, the real public policy debate at hand, then it takes on the air of sophistry.

                    If MMT could reach down and say – “you know what, when it comes to using the sovereign fiat money system to change the world, reserves are not really the money we’re talking about “ – then it would achieve a much greater strength in the desired outcome of making money, and banking, the servers of the people.

                    Thanks.

                  • “And the Board of Governors does not issue currency into circulation. OK.”

                    Federal Reserve notes are issued by the Board of Governors, to the Reserve Banks, via the Federal Reserve agents. The Reserve Banks then ‘issue them into circulation’ by selling them to banks.

                    12 USC § 411 – Issuance to reserve banks; nature of obligation; redemption:
                    12 USC § 412 – Application for notes; collateral required
                    12 USC § 414 – Authority of Board of Governors respecting issuance of notes; interest; lien
                    12 USC § 418 – Printing of notes; denomination and form
                    12 USC § 419 – Delivery of notes prior to delivery to banks

                    “Reserves… are not money”.

                    Say you deposit $100 in Federal Reserve notes at your bank. The bank puts the notes in its vault and credits your deposit account. The notes are now part of the bank’s reserves. Then the bank decides that it doesn’t need so many notes in its vault, so deposits them at its local Reserve Bank. The Reserve Bank takes the notes and credits the bank’s reserve account balance.

                    According to you that credit is not “money”. According to practically everyone else, it is.

                    “The CB and FRBs are part of the private sector of the US economy, IN REALITY”

                    In reality, the Federal Reserve Banks have an intermediate legal status, between public and private.

                  • Maybe there should be some distinction between money in circulation and money deposited in a bank.

                  • joe bongiovanni

                    I have already thoroughly covered the substance of this comment. If you are incapable of distinguishing between the Board of Governors, which is public and policy-setting, and the PRIVATE FRBs, that ISSUE the currency, then that is your problem.
                    The effort should be made to DISTINGUISH between the two, not to obfuscate the public policy implications of continuing a misunderstanding.
                    I used your Fed Staff JPD quote to show your own error.
                    I wrote earlier – “”it is clear from JPD note that it is the private bankers of the FRBs that issue the cash-currency into circulation, and benefits from same.

                    “”The Federal Reserve Banks then place the currency in circulation, in effect selling currency to banks and other depository institutions,…….. Each Reserve Bank pledges as collateral its assets equal to the amount of notes it has outstanding.””

                    Above you wrote:
                    “Federal Reserve notes are issued by the Board of Governors, to the Reserve Banks …..,
                    The Reserve Banks then ‘issue them into circulation’ by selling them to banks.”

                    That is your humble opinion and a wrong interpretation of both the statute and the Fed staff’s memo.
                    You imply two meaning to the word “issue” relating to money.
                    There are two legal aspects of money here: one is ‘creation’, and one is ‘issuance’.
                    Issuance means ‘into circulation’, where they obtain currency.
                    Look it up.
                    In the old days, banks used to print up BankNotes and keep them in their vault.
                    Only when they become collateralized and issued into circulation do they have a monetary value.
                    The same goes for FRNs.

                    And who, exactly, in this currency-issuing process, are these Federal Reserve ‘agents’?
                    Never heard tell of them.
                    Are they agents of the Board of Governors?
                    Are they public employees?
                    Or, are they agents of the FRBanks?
                    And private bank employees?
                    Please.

                    I also said that I am familiar with the statutes.
                    If there is anything there, in any of those statutes, that contradicts the legal fact that the PRIVATE Fed banks issue the currency, then please say exactly what that is.

                    Finally, I have been around long enough to spot the sleight of hand of cash and reserves.
                    I have said that non-cash reserves are not money.
                    I never said a cash reserves ‘credit’ to a bank’s reserve account is not money.
                    Cash is money. Cash is reserves. But non-cash reserves are not money.
                    Please do not say things like ‘according to you’ that I do not say.
                    “According to you that credit is not “money”.
                    I never said a cash reserves ‘credit’ to a bank’s reserve account is not money.
                    We are much better served if you ASK ME if that transaction involves money.
                    All cash is money in the present system.
                    Thanks.

                  • I can’t see the point of your argument that “non-cash” reserves are not money.

                    Banks can withdraw their “non-cash reserves” as cash or they can leave them in the Fed as “non-cash reserves”. Why is one money and the other not?

                    If you read the US Code sections mentioned in my previous comment you will see that the following language is used:

                    1. Notes are issued TO the FRBs.
                    2. Notes are issued THROUGH the FRBs.

                    FRBs have to tender collateral equal in amount to the notes issued.

                    Federal Reserve agents are appointed by the Board of Governors.

                  • joe bongiovanni

                    Interesting. I agree with a lot of that. Let’s try to make it educational, while avoiding the weeds.

                    The first issue that arose from the video is the larger question of who creates and issues the nation’s money (the private banks).
                    So, who issues the money – in this case the paper currency referred to as cash in accounting terms? I believe all of the speakers in the video took the position that the private banks create the money. But…..

                    The question is really about who issues the paper money into initial circulation within the money system.
                    It’s not a question of who prints it, of who authorizes the printing, or who orders or who delivers the order for the paper currency, or where delivered, or of who regulates the paper currency at any time.
                    The Board of Governor’s role is laid out in subsection (d) of Section 11 of the FRA.
                    Issue and Retirement of Federal Reserve Notes
                    (d) To supervise and regulate through the Secretary of the Treasury the issue and retirement of Federal reserve notes ………., and to prescribe rules and regulations under which such notes may be delivered by the Secretary of the Treasury to the Federal reserve agents applying therefor. END

                    So the BoGs regulate and supervise and oversee and set rules and regulations on the issuance of FRNs.
                    Part of those Rules say the FRB agents “supply” the FRNs to the banking system. It does not say they ‘issue” them into circulation – making them money.
                    The actual issuance of ALL money into circulation is a matter of entering the money supply of the state of issue, whether bank credit (money) or paper money. Any bank that obtains new paper money for the purpose of increasing the quantity of national exchange media in the bank’s control is the bank that enters that paper money into circulation, and is the bank that issues that paper money.
                    From:
                    http://www.treasury.gov/about/education/Pages/distribution.aspx
                    (which actually helps with both of your questions.)
                    Currency Distribution
                    Every summer, the currency departments at each of the 12 Federal Reserve banks make recommendations about future currency needs. The banks then place orders with the Comptroller of the Currency. After reviewing the requests, the Comptroller forwards them to the Bureau of Engraving and Printing. It then produces the appropriate denominations of currency notes bearing the seal of the Federal Reserve bank placing the order. The Federal Reserve bank pays only the cost of producing the notes. These Federal Reserve notes are claims on the assets of the issuing Federal Reserve bank and liabilities of the United States Government.
                    The law requires that each Federal Reserve bank hold collateral that equals at least 100 percent of the value of the currency it issues…. END

                    It can be seen that there is no ‘issuance’ of paper money into circulation until it is collateralized BY the Regional Fed bank in the name of the bank placing that paper money into circulation. The FRBs pay only for the printing. Then, ‘you give me your collateral, DI, and I give you the cash’ – for universal exchange. That’s what you said above.

                    I have earlier explained the corollary to the printing and circulation of private BankNotes (which technically these are also) as thus. Any bank could print any Banknotes in any denomination and place them in their vault.
                    Are they currency(money)? No. They are paper. Only when a borrower takes the PARTICULAR (serialized) Banknote and provides collateral in an actual loan transaction could these banknotes enter circulation and serve as exchange media. Otherwise, it’s fraud.
                    It’s the same with paper currency and the FRBs. When the FRB receives the paper currency it pays for the paper. It is still not money. The laws that establish supervisory and regulatory control of our money system to the Board of Governors of the Federal Reserve system do not change the legal nature of issuing our nation’s money into circulation.
                    There is nothing in any of the statutes that you cited that contravenes or contradicts or negates this essential monetary reality. The private banks issue all of the nation’s money, coins excepted. The Board of Governors decides how.

                    There is also our issue of whether reserves are money – meaning do reserves serve our goal of creating jobs or the nation’s goal of facilitating universal exchange. Turning to the currency-reserve machinations within the Fed system, the issue is whether reserves are ‘money’. At the outset, they fail to meet the definition of money and legal tender. That should do it.
                    At the outset, the Chairman of the BoGs says they are not money. They are electronic balances created by the Fed – AT the Fed. “They just sit there…. They are not in circulation….”. Thus, they are not money.

                    But here, we are dealing an internal accounting norm, and I thought we agreed, they are always arbitrary, especially so in a national banking system. Having said that, accounting norms do not transcend the definitional and legal tender issues.
                    I don’t agree that you have accurately expressed the nature of a Fed-DI transaction. If I understand what you wrote, there seemed to be something of a transubstantiation of non-cash reserves to cash, with an anecdotal observation – “So ! They must BE money”
                    So, the FRBs have all this non-securitized paper in their own vaults and the role to provide liquidity to the system, including the cash needed.
                    On a day when a bank has NO CASH reserves (which is ridiculous), but needs additional cash, that bank can BORROW cash from the FRB(or other banks cheaper). To be clear, that bank MUST borrow that cash from the FRB. It cannot simply transform its non-cash reserves into new cash. That would be the accounting result, but it is not the same.
                    You provided the covering statute. 12 USC at 414. It’s the same one that is relevant to the above matter of issuing our money.
                    In essence it says that the Fed can grant any request for FRNs as a collateralized loan that includes set interest charges and a first lien on the bank. Much shortened here.
                    12 USC (s) 414
                    ‘The Board of Governors of the Federal Reserve System shall………….., through its local Federal Reserve agent, supply Federal Reserve notes to the banks so applying, and such bank shall be charged with the amount of the notes issued to it and shall pay such rate of interest as may be established by the Board of Governors of the Federal Reserve System….. Federal Reserve notes issued to any such bank shall, ….., become a first and paramount lien on all the assets of such bank.”
                    The system provides liquidity, including supplying the cash to the Member DIs.
                    If you or anyone believes that a DI can , under any pertinent Regulation, acquire new paper currency(FRNs) outside this established measure, such as through transformation of non-cash reserves, then please say where such authorization exists.
                    Thanks.

            • “There is a soft MMT proposal that government not issue bonds – Mosler and others. But there is a stronger MMT construct that the money quantity be controlled by its market price”

              The MMT proposal is generally that the Treasury should be allowed to spend without issuing bonds and that the base interest rate should be left at zero or thereabouts. Banks should be allowed to create deposits (i.e. not full reserve banking) but their credit-creation activities should be controlled through alternative forms of monetary policy and regulation rather than through central bank interest-rate changes.

              “And I don’t mean full-reserve banking.”

              Well if in your ideal system all money is created by the government and banks are not permitted to create their own deposits, then that’s a “full reserve system” – i.e. all bank deposits are “reserves” or govt-issued money.

              • (By the way, the Levy Institute ‘Monetary Policy and Financial Structure’ research group is the following people: Dimitri B. Papadimitriou, Jan Kregel, James K. Galbraith, L. Randall Wray, Greg Hannsgen, Marshall Auerback, Jörg Bibow, Steven M. Fazzari, Michael Hudson, Thorvald Grung Moe, Robert W. Parenteau, Sunanda Sen, Willem Thorbecke, Éric Tymoigne.)

              • joe bongiovanni

                y, thanks again.
                “The MMT proposal is generally that the Treasury should be allowed to spend without issuing bonds…….”
                Should be allowed? Or does now?
                MMT claims that government creates money when it spends NOW. Why issue bonds?
                That’s my issue with MMT. It describes itself as a “what is now” money school. ‘No need for reform’, is the oft-heard refrain.
                We all agree that the government “should be able to spend deficit balances” without issuing debt. But the government (Treasury) cannot do that.
                But if you and the others want that right of Treasury to become reality, at some point you need to take off the blinders and prepare a legislative solution to change “what is” to what “could be” and “should be”, and then an end to government borrowing is what ‘will be’.
                “Banks should be allowed to create deposits (i.e. not full reserve banking) but their credit-creation activities should be controlled through alternative forms of monetary policy and regulation rather than through central bank interest-rate changes.”
                I have read that Levy Institute paper (no internet) and do not find what you might mean by “alternative forms of monetary policy and regulation” that replace open-market operations.

                When any bank makes any loan, it has the power to ‘create a deposit’. That’s what banks do. Why don’t you take a minute and explain WHY the bank should be able to create that deposit – OUT IF NOTHING. Why not explain why any progressively-minded person would provide privilege to any private entity to control the purchasing power of the national economy.

                Please explain WHY that bank ought not get it’s money FROM its depositors – paying its depositors interest – BEFORE it makes that loan and creates that new deposit for its borrower.
                This is the crux of the issue between reformers and non-reformers like MMT.
                The banks should create ‘credit’, but not create ‘money’.

                “And I don’t mean full-reserve banking.”
                Fixing your comment to square with mine on this –
                “”Well if in your ideal system all money is created by the government and banks are not permitted to create their own deposits, then … all bank deposits are govt-issued money.””
                If you’ve read the Kucinich Bill, then surely you would understand this.
                Thanks.

                • “Should be allowed? Or does now?”

                  At present the Treasury has to match its deficit spending with bond issuance.

                  “MMT claims that government creates money when it spends NOW.”

                  Yes. If money is a government liability, obligation, or debt, then the government creates new liabilities, obligations or debts when it spends, and cancels them when it taxes. This is also the case if money is treated as equity – the government creates new ‘shares’ when it spends and destroys them when it taxes.

                  “Why issue bonds?”

                  Why indeed. Gold standard thinking perhaps?

                  ‘No need for reform’, is the oft-heard refrain.”

                  I think you’ll find that MMT economists advocate reform.

                  “We all agree that the government “should be able to spend deficit balances” without issuing debt. But the government (Treasury) cannot do that.”

                  It has to issue bonds at present, though the FRBNY may end up just holding them and not selling them. According to recent comments by Brad Delong, the FRBNY credits the Treasury general account as soon as the Tsy “sends the bonds over” to the FRBNY, prior to them having been sold into the market.

                  MMT economists maintain that the requirement to sell bonds places no operational constraints on the government’s ability to spend, that the whole thing is a bit of a charade which could be done away with.

                  “But if you and the others want that right of Treasury to become reality, at some point you need to take off the blinders and prepare a legislative solution to change “what is” to what “could be” and “should be”, and then an end to government borrowing is what ‘will be’.”

                  MMT does want that right of the Treasury to become a reality.

                  “I have read that Levy Institute paper (no internet) and do not find what you might mean by “alternative forms of monetary policy and regulation” that replace open-market operations.”

                  I’ll get back to you with some details in a minute.

                  “Why don’t you take a minute and explain WHY the bank should be able to create that deposit – OUT IF NOTHING.”

                  The deposit is a bank liability – it represents money owed by the bank to the depositor. It’s a promise to pay, a debt.

                  “Please explain WHY that bank ought not get it’s money FROM its depositors – paying its depositors interest – BEFORE it makes that loan and creates that new deposit for its borrower.”

                  There’s arguments for and against full-reserve banking. Personally I haven’t made my mind up on the subject.

                  “all bank deposits are govt-issued money.”

                  Bank deposits are bank liabilities, not bank assets.

                  • joe bongiovanni

                    Where to begin?
                    Here. The government does NOT create new liabilities, obligations or debts when it spends.
                    That fact has nothing to do with whether ‘money’ itself is created as a liability, obligation or debt, or NOT. The government is a user of the private system of money, where banks issue ALL the money. Government spending has ZERO effect on the money supply, or on the stock of debts, liabilities or obligations. It passes them from one party to another.
                    The bank lending the Billion to the government creates a liability of the government to the bank, but by using the proceeds of the loan, the government does not create any additional liability, nor any debts, nor any obligations. That construct is incomprehensible.
                    Please provide a link to Brad’s comment.
                    “MMT economists maintain that the requirement to sell bonds places no operational constraints on the government’s ability to spend, that the whole thing is a bit of a charade which could be done away with.”
                    There’s no definition of ‘operational’. It’s an in-house term that covers a lot of ground. What does it mean? There is a requirement to sell bonds, and to first get the bond proceeds before the government can spend. There is even a ceiling on the amount of bonding. Sounds pretty constraining to me. But operationally? Who knows.
                    I’ve read and heard Randy’s explanations. They are not a discernable construct of legal facts. We agree that the government should stop issuing bonds, bills, etc. Is that part of the MMT Manifesto?
                    If so, then how does MMT fund the government’s deficit balances? This is a key provision of current law that must be reformed. But I hear nothing from MMT on this aspect, excepting of course, Platinum coinage by a few adherents. Hooray for that.
                    “The deposit is a bank liability – it represents money owed by the bank to the depositor. It’s a promise to pay, a debt. “
                    PUHLEEZ. It’s debt-based money, double entry accounting. The securitized PN is the bank’s asset. The bank creates the PN and deposit out of nothing. That represents newly created purchasing power for the economy and an income stream to the bank. That PN and deposit would still happen with full reserve banking, except there would be money in the bank first, belonging to a depositor.
                    The bank would create credit, but not money.
                    “all bank deposits are govt-issued money.”
                    Bank deposits are bank liabilities, not bank assets.
                    Jeezum. Did I say that all bank deposits are government-issued money?
                    What a twist of fate.

                  • “The government does NOT create new liabilities, obligations or debts when it spends.”

                    If you consider the monetary base to be an obligation of the govt, then it does.

                    “Government spending has ZERO effect on the money supply”

                    This isn’t correct. Imagine for example that there are no reserves, Federal Reserve notes or govt bonds in existence. Now imagine that the govt decides to deficit spend $100, so as to pay ‘Mr Smith’ $100.

                    Under the current system, where the Treasury isn’t supposed to borrow directly from the Fed, the following would happen (this is simplified by the way):

                    1. The Treasury sells a $100 bond to bank A.
                    2. Bank A borrows $100 from the Fed to pay for the bond.
                    3. The Treasury spends $100 to pay Mr Smith. The Fed debits $100 from the Treasury’s account and credits $100 to bank B’s reserve account.
                    4. Bank B credits Mr Smith’s account with $100.

                    Now let’s say bank A repays the $100 it owes to the Fed by giving it the Treasury bond.

                    At the end of this process bank B has $100 in reserves, Mr Smith has a $100 deposit, and the Fed has a $100 Treasury bond.

                    So you can see that the money supply (reserves and deposits) has increased as the result of the government deficit spending.

                  • joe bongiovanni

                    Please, do us both a favor.
                    Following bank A and purchase B and who zoomed who has no meaning whatever to the issues that are at hand.

                    “If you consider the monetary base to be an obligation of the govt, then it does.”
                    EVEN if you did, which is ludicrous, there is no CHANGE to the monetary base by government spending.

                    I said : “Government spending has ZERO effect on the money supply”;
                    Y says : This isn’t correct. Imagine for example that there are no reserves, Federal Reserve notes or govt bonds in existence. Now imagine that the govt decides to deficit spend $100, so as to pay ‘Mr Smith’ $100.
                    Let’s be candid. Under YOUR definition, there would be no money in existence, as bank credit counts as reserves. So, no reserves, no bank credit. No loan transaction can take place between the Treasury and any bank until that bank borrows the $ – as you say from the Fed.
                    Here’s the thing – if you ASSUME no money supply, and you ASSUME any loan from anyone to anyone – then, guess what?, there WILL be an increase in the money supply by the amount of the loan. It’s axiomatic. But in the real world –the one in which we live, work, borrow and lend, money MUST exist in order for the government to borrow money.
                    But notice – it was the BORROWING transaction that increased the money supply – and not the spending.
                    Nuff said.

                    You end his rabbit-hole jaunt with this statement – “So you can see that the money supply (reserves and deposits) has increased as the result of the government deficit spending.”
                    In reality, it matters not from where the money comes that funds government spending, taxation or bond-proceeds. In either case, it’s existing money.
                    Unfortunately, I have to ask again WHY are we discussing WHETHER reserves are part of the money supply? What purpose do you claim is being informed by this.
                    Rather, we should be bringing people aboard a discussion about how to fix the national economy by the proper use of the sovereign, fiat money system?
                    For the Money System Common.

                  • “The bank creates the PN and deposit out of nothing”

                    Say you go into a shop and pay for something by giving the shopkeeper an IOU. You’ve just “created a deposit out of nothing”.

                  • joe bongiovanni

                    “Say you go into a shop and pay for something by giving the shopkeeper an IOU. You’ve just “created a deposit out of nothing”.

                    I guess we’re at the point of vaporizing meanings.
                    That was an extension of credit by the shopkeeper to me.
                    His consideration was his inventory. He brought something to the transaction that he owned.
                    That was not a deposit, solely a credit transaction.
                    If I did sign the slip, the shoppie reduced inventory and gained an account receivable – which is not something that is deposited.
                    Eventually, I am obligated to cancel the IOU with money – which will have been created by a private bank somewhere along the line.
                    There are a few financial actors that transact in accounts receivable – and most of them are total shysters.
                    Further, yet further, afield.
                    Why?

                  • “There’s no definition of ‘operational’. It’s an in-house term that covers a lot of ground. What does it mean?”

                    If Congress wants to spend dollars it can. Any requirement to issue bonds doesn’t change that.

                    “Jeezum. Did I say that all bank deposits are government-issued money?
                    What a twist of fate.”

                    What is that supposed to mean?

                  • “But notice – it was the BORROWING transaction that increased the money supply – and not the spending.”

                    Let’s go back to my example and imagine that this time the Treasury doesn’t have to issue bonds and instead just orders the Fed to credit bank accounts on its behalf.

                    If the Treasury spends $100 to pay Mr Smith, bank reserves increase by $100, and bank deposits increase by $100.

                    Notice that this is the same result as in my first example, in which bank reserves increased by $100 and bank deposits increased by $100. In my first example, however, there was also the addition of a bond, which ended up being held by the Fed.

                    You are correct that in my first example the process starts with borrowing. But in both cases there is exactly the same increase in reserves and deposits following government spending.

                    “Rather, we should be bringing people aboard a discussion about how to fix the national economy by the proper use of the sovereign, fiat money system?”

                    That would be good, but you’re the one who’s getting angry about the fact that not everyone agrees with your arguments, your definitions, and your plans for reform.

                  • joe bongiovanni

                    “Let’s go back to my example and imagine that this time the Treasury doesn’t have to issue bonds and instead just orders the Fed to credit bank accounts on its behalf. “
                    How ‘bout this?
                    If there’s still no money supply, then the Treasury can’t order the Fed to do anything. It’s one of those wrinkles in MMT. By its failure to acknowledge what everyone else in the world seems to know for sure – that the government itself is a user of the money system and needs to get money before it can spend – it can conjure up all sorts of fascinating ‘pretends’ and imagines’.
                    Since there was a US Treasury, that Treasury has never had the power to spend a plug nickel that it didn’t have. We had $6 million in debt before we minted our first coin. The Fed’s no-overdraft rule merely institutionalizes that reality within the present system. If you want to pretend, let’s pretend that the Treasury was independent of the Fed, that the Treasury could spend from its own accounts – of which there IS a history and a much more realistic break from our present situation.
                    Even then, the Treasury could not spend money that it didn’t have. That’s why Lincoln had to go to Congress and have them pass the Greenback authorizations. Now they could be printed and be issued by Treasury with ‘currency’ of the realm.
                    So, in order for the government to ‘spend’ money, it must have money.
                    As I said, I have read Randy and Warren’s machinations of the accommodation that goes on between Treasury and the Fed for various operational considerations that stem from having a private central bank. In reality, it is the Treasury that is serving the needs of the Fed, and not vice-versa.

                    More importantly, PLEASE try to remember that the substance of any money system discussion must be clear as to how things measure up between the goals and aspirations of the reformers(full employment, social equity, wealth distribution, etc.), and how the present system relates to both the problems and the solutions.
                    I have been a monetary reformer for 40 years because I believe the present system is at fault and responsible for the problems in our socio-economic fabric. And there can be no solution without a recognition of what is wrong.

                    Me: “Rather, we should be bringing people aboard a discussion about how to fix the national economy by the proper use of the sovereign, fiat money system?”;
                    Y – That would be good, but you’re the one who’s getting angry about the fact that not everyone agrees with your arguments, your definitions, and your plans for reform.

                    Here’s the thing, Y.
                    I want everybody to disagree with my plans for reform. That’s the only way we can both learn. But I want that to happen in an honest and robust discussion that is as self-searching as it is critical, which is what I try to do.
                    I didn’t discover the money system after the financial crash. Almost fifty years ago my Dad tried to convince me that we would never have the things that were important to me like peace, a clean environment and social justice until we fixed the money system. For ten years I resisted because like many progressives, MONEY was anathema to what was important in my world.
                    But my Dad challenged me to read Soddy, his Cartesian Economics lectures which scientifically tied labor and energy to the workings of the money system; his “Wealth, Virtual Wealth and Debt”, which showed how it was debt that kept us all focused on paper wealth and prevented the sharing of the benefits of sustainable resource conversion, and his “The Role of Money” which clearly advanced the understanding of a scientific national money system as a distributive engine that could advance our economic prosperity beyond the eternal battle between the haves and the have-nots.
                    So, to me, MMT has discovered the sovereign fiat money system as a technological and accounting marvel, freed from fixed exchange rates and commodity backing.
                    To which I say – GREAT !. But don’t stop there, if you want to make a revolution.
                    Which I do.
                    For the Money system Common.

                  • “I guess we’re at the point of vaporizing meanings.”

                    If you give someone an IOU, you owe them money. If they never ask for the money, then you never have to pay it. If people don’t withdraw their deposits as cash, then banks never have to pay them with cash.

                  • “But don’t stop there, if you want to make a revolution.
                    Which I do.”

                    The only real difference between you and MMT when it comes to policy, as far as I can tell, is that you want full reserve banking. That’s it. I know you don’t call it that, but that’s what you want.

                    All the disagreements over the description of the current system, whether the central bank is private or not, etc, are an interesting but not particularly important sideshow, compared to this disagreement over policy.

                    You should realise that no matter how self-righteous you feel or how convinced you are of the absolute truth of your opinions, others might well disagree with you for good reasons, some of those being that not all of your facts are correct.

            • “Why would a government issue ‘money’ that earns interest to itself?”

              Paying interest on your liabilities (money), gives people an incentive to hold them.

              Government can create additional demand for its currency by offering to pay interest on it. Either by paying interest on reserve balances, or by selling bonds.

              Think of it: would you rather hold currency which pays zero interest, or would you rather hold money which pays 5% interest?

              You are more likely to sell non-interest bearing money for other assets which earn interest or gain value. This can put downward pressure on the value or purchasing power of the money you are selling.

              So governments try to strengthen demand for their currency, to avoid depreciation or inflation, by altering the rate of interest they pay people to hold it, and by selling it in the form of interest-bearing bonds.

              That’s the theory anyway, I think.

              • Why would any country want to stimulate demand for its currency, beyond what it takes to conduct trade ?

                • If a government can finance all of its desired deficit spending by issuing money at 0% interest (what some would call ‘borrowing at 0% interest, and what Monetary Reformers might call ‘debt free money’) without incurring unwanted levels of inflation or currency depreciation, then it probably makes sense that it should do so (so long as it compensates people who need risk-free forms of saving or income that is generally protected from inflation – such as pensioners) .

                  Those who disagree with the zero (base) interest rate and “no govt bonds” policies advocated by some MMTers would argue, however, that this is generally not possible.

                  • I thought that we were discussing debt free money issued by the government, rather than the current system of interest bearing debt money created by private banks. In the former case, there is no need for interest per se, since the currency would enter the economy debt free. However, there would still be a role to play for banks, who could be licensed as retail borrowers/lenders for those private entities, who need to borrow sums of money and are prepared to pay interest for the privilege. This would provide a means for people with excess income over expenditure to profitably place their money for future use. Debt free money created by the government would take away from the private banks the ability to create money, but would not exclude them from borrowing and lending to support the economy.

                  • So you’re saying the government would pay 0% interest to holders of its own money, but that private sector agents would then lend that money out at interest in a sort of “loanable funds” market, in which the interest rate is determined by the quantity of funds available?

                    Would there also be a central bank in this economy, which could lend currency at a given interest rate?

                  • The central bank would be the US Treasury, who would be able to lend out money at interest to the private sector banks. These banks would then be able to lend this money at some mark up to enable them to pay their overhead and make a profit. They could be regulated in a similar manner to the utility companies.

              • joe bongiovanni

                Hey, that’s an interesting concept, y.
                Very well done. But still just another explication of how we attempt to square a private, debt-based money system with our true monetary sovereignty.
                If you understand national monetary sovereignty – not that of RMM and others – every nation has full and complete sovereignty over its ‘money system’ and thus makes laws that govern the operation of that system. Autonomy and independence are aspects of that sovereignty. Legal tender is how the sovereign assures utility of its money in national commerce.
                To imply that a nation either needs to, or can, add ‘currency’ to its money system by paying people to use it is, quite frankly, ludicrous.
                A sovereign nation needs merely a workable, legal construct for its money system, and proper management of that construct, and its money system will function fully and completely in its national interest. No need for bribes. Or for taxation.
                That a government would care to provide a safe haven for the investment of its citizens that they cannot get from the private financial intermediaries is an option of its independence. Various forms of savings bonds are all that is needed to accommodate that penchant of savers.
                Anytime that public-savings function becomes a marketable substitute for real money, it has passed its useful phase. National money provides the exchange media for private commerce in the national economy. It has a secondary function as a store of wealth value. But money itself is not a monetary asset. And a monetary asset is not money. It is only the debt-based money construct that provides artificial life-support to such a notion.
                It is unnecessary. And it is wrong.
                But an interesting concept to ponder.
                Thanks.

  2. A far simpler and better proposal to reform the US monetary system, would be the adoption of HR 2990 as proposed by Dennis Kucinich.

    http://www.govtrack.us/congress/bills/112/hr2990/text

  3. For new readers to these concepts, who have viewed the first speaker in the video, Christine Desan (Harvard Law School), please consider Dr. Stephanie Kelton’s earlier presentations to compare and contrast:

    Dr. Stephanie Kelton: Modern Money Theory Explained (2012 Italian MMT Summit)
    http://mediaroots.org/dr.-stephanie-kelton-modern-money-theory-explained.php

    Dr. Stephanie Kelton presenting on Fiscal Cliff (C-SPAN)
    http://neweconomicperspectives.org/2012/11/stephanie-kelton-presenting-on-fiscal-cliff.html