Talking Points for the 99% (Part 1)

By J.D. Alt

 (This is the working draft of a short, targeted eBOOK directed specifically at the millennials—the huge generation of energetic, creative, and cooperatively inclined young people who might, just maybe, rise up and demand a new understanding of the American economy. The eBOOK has three goals: (1) explain the basics of MMT to those who’ve never heard of it (2) unveil, at least partially, the misinformation network of the status-quo, and (3) suggest the scale of very real collective benefits a new understanding actually makes possible. Any suggestions about fine-tuning—or fundamentally altering, if necessary—the basic message of the essay are welcomed. (I’ve divided the draft into two parts to better fit the blogosphere.)

How is it the 1% exerts such complete and dominant control over our national agenda? And by what means can the 99% claim the collective power that, by democratic rights, should be firmly in their hands? The answers obviously have something to do with money—after all, the 1% are defined by various monetary measurements: the top 1% own 42% of the total financial wealth in the U.S. economy; the top 1% own 35% of all privately held stock, 64% of all financial securities, and 62% of all business equity. If all those percentages have a numbing affect, here’s another way to frame it: The top 400 families in America own more financial wealth than the bottom 150 MILLION families combined!

The 1% clearly control the money, and they use that money not only to make more money but to exert political power in a myriad of ways. But implicit in this perspective is a profound misunderstanding about money itself—and it is this key misunderstanding which oppresses the 99% far more than the income disparity itself: Not only is the misunderstanding relentlessly exploited by the 1% to maintain their advantage—more insidiously, it prevents the 99% from even seeing the paths of opportunity available to it.

The critical—and crippling—misunderstanding about money is embodied in a narrative that is echoed daily, hourly, with drumbeat regularity, in the national media and spin-chambers (which are controlled and financed, not suprisingly, by the 1%.) The narrative will sound very familiar—it goes like this:

The financial wealth of a nation is, at any given time, a finite resource privately and individually held by the citizens; any and all government spending must, therefore, be funded by the collection of taxes. An “out-of-control,” “big government” spends more Dollars than the citizens are willing (or able) to pay in taxes—and this lack of “fiscal responsibility” requires the government to borrow Dollars from the financial markets to make up the difference. This borrowing places the “out-of-control” government in direct competition for Dollar resources with the business-financial class of citizens. Since all citizens are ultimately dependent upon the business-financial class to create jobs and pay wages, this competition for Dollar resources by “big government” diminishes the overall prosperity of the citizens—a diminishing that is compounded by the burden of tax payments, and further compounded by the government’s debt which represents future tax burdens.

The narrative continues with the indignant observation that government gets “too big” and “out-of-control” because in a democracy citizens with meager financial resources are able to vote for government spending programs that provide services and benefits which they, themselves, cannot afford to buy. The 1% agenda, therefore, is specifically focused on limiting or eliminating government spending programs which benefit the poor. The 1% perspective is that the best that can be done for citizens with meager financial resources is to shrink the government and limit its spending, thus making more Dollars available to the business-financial class for job creation and wages. Providing financially struggling citizens with assistance, or welfare, or “free” services succeeds only in creating a culture of dependency. The very last thing the 1% agenda would ever abide is for the government to “print” money to pay for the costs of its “out-of-control” spending, since such a policy would destroy the value of the citizen’s Dollars (of which the 1% own the vast majority) and create the disastrous consequences of inflation.

Why the 99% struggles to respond.

To date, the 99% have no effective response to this drumbeat narrative for the simple reason that they have implicitly agreed with its most basic premise: In order to spend, the U.S. government has to either collect taxes or borrow Dollars from the private sector economy. This premise is taken to be such a logical, common-sense truth, it never occurs to the 99% to question its validity. Because they buy this premise, the 99% are left with only the defensive position of trying to justify higher taxes on the wealthy (to help the government mitigate the pain and social problems of poverty, for example)—or having to justify continued government borrowing (to help recover from the devastation of catastrophic super-storms, for example.) Is there need for a special social program targeting a collective good? “Pay as you go” is the only logic of the 1% basic premise. Thus, for example, President Obama’s “universal” pre-school program is proposed to be “funded” with a 94 cent tax increase on cigarettes and tobacco products. The money to provide our preschool children with early reading and learning skills, in other words, has to be taken from somewhere else—a zero sum game that requires someone to lose in order for others to gain.

What the 99% must come to realize, however—even if it seems impossibly doubtful at first blush—is that because of the realities of the modern fiat currency we use today, the central premise of the 1% narrative is false. More important, revealing the truth behind this false premise can create an opportunity for the 99% to build a powerful counter-narrative with which to duel the 1% agenda. Anger and outrage are not enough. The next time an urban plaza is “occupied” there needs to be a cohesive argument about what the underlying problem actually is, and how to fix it. The purpose of this small essay is to suggest a platform upon which that counter-argument might be constructed. The platform is composed of five simple talking points which reveal—each from a slightly different perspective—the single, root cause of the 99 percent’s continuing frustration and oppression: The failure of sovereign government to fairly and effectively manage the national fiat currency (money) over which the sovereign government, in fact, has exclusive control. 

The Talking Points

  1. Any sovereign nation which fails to provide its citizens with the full benefits available to them by virtue of the sovereign’s inherent ability to issue and manage its own fiat currency should be strongly challenged by its citizenry.
  2. Any economist who makes the claim, either explicit or implicit, that a nation which issues and manages a sovereign fiat currency must either borrow or collect taxes in order to have currency to spend, should have his or her diploma revoked.
  3. Any political leader in a sovereign nation which issues and manages its own fiat currency who claims the national government doesn’t have the “money” to pay for goods or services which are, in fact, available within the national borders—and which would greatly benefit the citizens—should be tarred and feathered and drummed out of office as an ignorant charlatan.
  4. Any banker or financial leader who suggests that a sovereign nation which issues and manages its own fiat currency is dependent upon the bond market to “finance” its sovereign spending should be investigated and prosecuted for the financial frauds they are more than likely in the act of perpetrating.
  5. Any journalist who makes his or her living counseling the public about economic matters, who fails to take the time to understand and explain to his or her audience how sovereign fiat currencies actually function, should be summarily stripped of their journalistic credentials and pushed out the door of the newsroom.

These talking points can be supported with a simple set of facts and logic easily grasped by any person with or without an interest in economics. Let’s begin with the pivotal terms contained in each of the five points: “sovereign nation” and “fiat currency.” Simply acknowledging the basic meaning of these terms (and their relationship to each other) will lay the foundation for virtually everything that needs to be understood for the 99% to take control of their destiny.

Sovereign Nation

What is a sovereign nation? It is a group of people within a claimed territorial boundary (recognized by other sovereign nations) who are joined together by a social contract stipulating that each individual citizen agrees to abide by the rules exclusively established and enforced by the group. For our purposes, we don’t need to get any more complicated than that: I am a citizen of the sovereign nation USA, and I agree to abide by the rules established and enforced by, and within the borders of, the USA.

Fiat Currency

What is a fiat currency? It is the result of one of the rules established and enforced by the sovereign nation: The U.S. government establishes that it will, on a regular basis, collect taxes from its citizens. It further declares that the only thing it will accept as payment for taxes due is the sovereign currency which the government, itself, will print or issue electronically—(in America, this is the U.S. Dollar).  The sovereign government of USA creates these Dollars by “fiat” (it “declares” them into existence) and it is the only entity which can issue U.S. Dollars. Everyone else—families, corporations, banks, state and local governments—are users of the fiat Dollars the sovereign government issues. Anyone else who tries to issue a U.S. Dollar is a counterfeiter and subject to imprisonment.

This is how Money is created!

The two simple statements above explain how, in fact, money is created in modern societies. We, as citizens, don’t accept U.S. Dollars in exchange for our labor, or for the goods we produce, because those dollars have any intrinsic value—or because they can be converted, on demand, into something else that has intrinsic value (gold, for example.) U.S. fiat currency—the U.S. Dollar issued by the sovereign government—is nothing more, and nothing other, than a promise by the sovereign government (by virtue of its declarations) to accept that Dollar as payment for Federal taxes owed. We citizens, in turn, accept fiat Dollars as payment for the goods or services we provide because we know two things:

  1. We are going to need some of those Dollars to pay our taxes with, and
  2. Other citizens will, in turn, accept fiat Dollars from us—as payment for the goods and services we need from them—for exactly the same reason.

The “value” of the fiat currency, then, lies directly in the original declaration by the sovereign government that taxes MUST be paid using the fiat currency issued by the government. As we shall see, the implications of this fundamental truth are enormous for the aspirations of the 99%. But first, it is necessary to counter a volley of objections from those who believe that “fiat” money is not “real” money, and whose chorus of alarms continuously reinforces the 1% narrative.

What about Gold and Silver?

Most of our cultural instincts about money are based on an underlying and implicit “story” about precious metals. The only “real” money in this story is gold and silver, or the “old” U.S. Dollars that used to be convertible, on demand, to some specific amount of gold or silver. In this tale, the gold and silver coins that used to circulate as money derived their value, of course, from the amount of gold or silver each coin contained. In order for them to be used efficiently as a medium of exchange (with everyone being able to quickly ascertain a coin’s value) some authority had to “strike” or “mint” the coins (emboss them with a figure) to certify the amount of metal each contained. This service was typically provided by the sovereign government—the King or Emperor, or Queen, back in those ancient days—and the figure embossed on the coin was, more often than not, the visage of that sovereign leader. The Monarchy then acquired its own supply of the gold and silver coins by taxing the citizens.

The story continues along these lines: Citizens who, by one means or another, amassed large amounts of these gold and silver coins, needed some place to safely store them. Banks were created for this purpose, and “bank notes” were paper receipts issued by the banks for the gold coins held in deposit. Soon the paper bank notes themselves were used as money, with people accepting them in exchange for goods and services because of the actual gold backing them up in the bank’s vault.

Gold to Modern Fiat Money—a transition of fuzzy logic

In the modern world today there is no national currency that is backed by either gold or silver. All sovereign monies are fiat currencies—the U.S. Dollar, the Japanese Yen, the Russian Ruble, the Chinese Yuan, the British Pound, etc.. Gold coins, which are still minted for commemorative purposes, are simply decorative chunks of precious metal—not unlike jewelry—which are purchased with fiat money (in the same way that precious jewelry is purchased.) The U.S. Dollar has had no real or implied connection to gold for over forty years. Richard Nixon took the U.S. (and consequently the rest of the world) off the gold standard in 1971. The reason was quite simple: it had become painfully apparent that there was not enough gold in the world to “back up” all the sovereign currency that was being created to cover the dramatic expansion of goods and services in the global economy. When Charles de Gaul, the French president, demanded that the U.S. convert all the French-held U.S. Dollars into gold, it was clear the game was up. Nixon acted, ushering in the modern era of pure fiat currencies.

Nevertheless, the implicit story about gold and silver “money” stubbornly persists, leading to the fuzzy reasoning that U.S. Dollars (and other fiat currencies) continue to “operate” according to the logic of gold and silver coins: (1) Dollars are “struck” by the government (which officially establishes their value); (2) they are owned by citizens and (3) kept in banks which loan them out to people and businesses. The sovereign government itself—when it needs Dollars to pay for its national programs and expenses—must get those Dollars either by collecting taxes or borrowing from the citizens.

The fuzzy logic of this persistent story is reinforced by historic anomaly: the U.S. Congress continues to maintain today laws that were implemented in the early 1900’s specifically to prevent the government, at that time, from issuing more Dollars than it could back up with gold. The Federal Reserve Act of 1913 established that for every Dollar the sovereign spends over and above what it collects in taxes, it is required by law to make up the difference by selling Treasury bonds to the citizens—in other words, it has to “borrow” existing Dollars already issued (rather than issuing new Dollars) if it needs to spend more than it collects in taxes.

It is the structure of this antiquated law which enshrines the Dollars and Gold story in our contemporary psyche by forcing the sovereign government to do something it otherwise, by logic, should no longer be doing in today’s world of fiat currency: measure what it can “afford” to spend in terms of what it can collect in taxes—and going into “debt” to make up the difference. It is by this law that the false choice is established which pits the citizens against their own government—a false confrontation heralded in every newspaper article about sovereign spending with the phrases “at the taxpayer’s expense,” or “spending taxpayer’s Dollars,” or “on the backs of taxpayers.” And the only thing we, the citizens, resent more than paying those taxes in the first place is the idea that the sovereign government is guaranteeing that we’ll have to pay even higher taxes in the future because of all the Dollars it is “borrowing”.

This story that the sovereign government is competing with the citizens for a finite amount of money that exists in the national economy—appropriating vast sums through taxation, borrowing vast sums which the citizens, themselves, will have to repay at some point in the future, depriving the business-financial class of Dollars it could otherwise be using to create jobs and pay wages—is the chanting mantra of the 1%. And for good reason—because it avoids the most basic question there is about the true nature of modern fiat currency: If only the sovereign government can issue fiat Dollars, then how do those Dollars get into the hands of the citizens?

It is the answer to this question that can potentially empower and liberate the 99%.

 

28 responses to “Talking Points for the 99% (Part 1)

  1. The paragraph beginning “The financial wealth of a nation is, at any given time, a finite resource privately and individually held by the citizens…” and any other paragraphs that present a myth or a truth could be either indented or italicized or both in order to set its purpose apart from the general discussion.

  2. Excellent post, JD, and a very good idea to pitch this primarily to Millennial s as they will have to take the lead if we are to change the rules and outcomes. One suggestion: can you rework the first paragraph to reach out and grab the reader by the lapels and compel him/her to read on. Perhaps start with the italicized sentence. Numbers and statistics may cause many readers to just move on to something else.
    Other suggestion: use diminution in ” —a diminishing that is compounded”

  3. Patricia Flanagan

    If we want to change the narrative , we need to stop repeating the false narrative. Why not just say before governments can tax, they need to put money into people’s hands by spending into the economy. Government deficit spending is the private sector’s surplus. Tax revenues are not necessary for governments with their own sovereign currency to finance spending. Taxes are a way for governments to reduce the harmful effects of income inequality on a society and to ensure that our productive capacity is being properly utilized for maximum benefit. Governments who do not deficit spend when there are people who want to work and can’t find work are harming many for the benefit of a few. High unemployment keeps wages low and puts more money in the hands of the wealthy. Governments who promote austerity are harming future generation by preventing people from working to invest in projects that will have lasting value. Let those that have constructed the false narrative provide the counter argument because as anyone who looks at this critically knows there is none.

    • financial matters

      Great points. I agree that these ideas stand well on their own. A friend of mine who markets to millennials says they like to know the background of what they are buying so I think there is great potential there. But as mentioned below all age groups can benefit from a greater understanding of these ideas. And as mentioned below the above comment doesn’t use the phrase ‘money printing’.

    • “If we want to change the narrative, we need to stop repeating the false narrative.”

      DON’T THINK OF AN ELEPHANT!, by George Lakoff, should be must reading for every MMTer.

      Too much time is spent unintentionally reinforcing the now obsolete and anti-democratic frame of gold-standard thinking. Let the status quo-ers do the reinforcing of MMT by attempting to negate it.

      • MMT should have a standard response: “That’s gold-standard thinking. It’s obsolete and no longer valid. We haven’t had a gold standard for 42 years. “

  4. I don’t know that millenials would react the same way, but when the argument contains phrases like “tarred and feathered”, “diploma revoked”, and the like, I tend to dismiss it because the resort to ad hominem attacks tends to indicate a lack of well-founded reasoning. Maybe it’s just me. It does seem to work in the political arena. If the target audience is already committed to the liberal cause, it could work. I like to think that well-founded reasoning is the strength of MMT, and that sort of rhetoric is unnecessary.

  5. There is no clear exposition that a main purpose in government being a creator, issuer and taxer of money is to provide the public goods and services the market doesn’t want to supply.

    • Non-monetarily sovereign governments provide public goods and services, too (one can quibble with the word “want”). There are legitimate roles for government, and they can be funded solely by taxes and borrowing, but for a monetarily sovereign government with a fiat currency and floating exchange rates, there are more options.

  6. Very well put together JD. I do have a couple comments/questions.
    I do not think this needs to draw focus to the unnecessary divide between the 99% vs. 1%. I think both groups equally have the realities of our monetary system logically flawed. The 1% would benefit just as greatly as the 99% if there was a proper understanding of how our monetary system operates.
    I do believe there is an inaccuracy of sorts in this as well. The Federal Government does as a matter of law need to finance its spending. It is entirely possible to operate as you have described but that would require altering how the US system currently operates. The US Federal Government has outsourced currency creation to the US banking system. The US Federal Government does however never need to be in fear of not having the money to spend (outside of its own doing via the debt ceiling or similiar legal constraint) as the banking system is strongly encouraged and benefits from accomodating the money creation neccessary for US Federal Government use.
    Thanks for the read.

    • Kyle,

      “The US Federal Government has outsourced currency creation to the US banking system. ”

      This is not what the law says. iow I dont think you will find your sentence here in the FRA…

      So its not correct to say: “the US govt has outsourced currency creation”, as there is no law that says this.

      This is what the law (FRA) says about not ‘the banking system’ but rather the FR banks: Section 15

      “Section 15. Government Deposits
      1. Federal Reserve banks as depositaries and fiscal agents of United States
      The moneys held in the general fund of the Treasury, except the five per centum fund for the redemption of outstanding national-bank notes may, upon the direction of the Secretary of the Treasury, be deposited in Federal reserve banks, which banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits.”

      There is no mention of ‘currency creation by the banks’.

      Section 16 authorizes FR Notes:

      Section 16. Note Issues
      1. Issuance of Federal Reserve notes; nature of obligation; where redeemable
      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 hereby 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”

      and the govt maintains responsibility for design and production of these notes:

      “8. Engraving of plates; denominations and form of notes
      In order to furnish suitable notes for circulation as Federal reserve notes, the Secretary of the Treasury shall cause plates and dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefrom and numbered such quantities of such notes of the denominations of $1, $2, $5, $10, $20, $50, $100, $500, $1,000 $5,000, $10,000 as may be required to supply the Federal reserve banks. Such notes shall be in form and tenor as directed by the Secretary of the Treasury under the provisions of this Act and shall bear the distinctive numbers of the several Federal reserve banks through which they are issued.”

      So I dont see where you get that ‘currency creation has been outsourced’… in the law anyway… if the law matters anymore…

      The law in the form of the FRA says that the Treasury Secretary MAY use the FR banks as ‘fiscal agents’… that is all.

      Yes the Treasury account has to have a credit balance at all times but that is easily accomplished by govt issuing US Treasury securities in advance of any planned govt withdrawals from the FR account in order to maintain a positive balance…

      rsp,

  7. I am 63 years old. A few years ago I broke my leg on the job and I was laid up for 5 months. Several years before this I filed Chapter 7 bankruptcy. I had never understood how the money I had borrowed using credit cards had mushroomed into such a huge debt. I decided I would use this time to try to learn something about economics. I thought it would be boring but much to my surprise it was the most interesting educational experience of my life. I stumbled upon Ellen Brown’s Web of Debt, then through many other searches finally found MMT. If I could have started with this essay, I think I would have saved a lot of time, though I don’t regret the time spent searching. At the end of the essay I would have been hungry for more, much more. I would suggest a series of essays such as this. The millennials are a good target group but don’t forget us old timers.

  8. 1. Research indicates that repeating a narrative with purpose of debunking it frequently but not invariably has instead the perverse effect of reinforceing it. Simply present your views and compel others to attemptto debunk your view instead.

    2. Doubtless many who read your pamphlet, other than those who are already in the MMT camp, will be thinking: I already knew the government could print as many dollars as it wants. It isnot like this is a secret (and if this were all that MMT offered, it surely wouldbe a waste of time). Instead it is the feeling that such printed money is just monopoly money, has no real value, and that should a government feel free to rint as much as it wants, then politicians will print as much money as they need to get on their supporters to get reelected, eventually causing wxcessive inflation. It is the fear of printing money that you must address, not its mere possibility.

    • 1. Often it is necessary to refer to the other view. MMT needs to say that the notion of the US being “broke” is just wrong. That inherently references the narrative that the US is broke. And it’s not possible to compel others to debunk MMT, without a lot more visibility of MMT. As things stand today, they can just ignore MMT, and that is working out very well for them.

      2. Our leaders say we’re broke, or the credit card is maxed out. That implies the same financial constraints as a State or a household. The general public does not understand the implications of being the issuer of the currency. Yes, they are afraid of inflation, and that fear needs to be addressed, but there is a more urgent fear of the complete financial failure of the government, of bankruptcy. Monetary sovereignty needs to be better understood before we can move on to inflation and solutions.

    • I think your second point, econhub, is the most valid and most important one that has to be addressed. MMT does seem to underestimate the importance of this issue as far as the general public is concerned. It revolves around the controls and limitations that must be in place to restrict the unbridled “printing of money”. It’s those controls that need to be emphasised and explained in clear and understandable detail – not just in a theoretical way, but in a truly rational and practical way.
      There is a real need for MMT to clearly define the parameters that must, and would apply to money creation.
      I believe those parameters have to be tied to the productive and consumption capacity of a growing economy.
      There are two issues relating to those parameters – there is no point in producing anything – goods or services – if they are not going to be consumed – the second issue is – if the money supply is equated to the availability of goods and services, then inflation/deflation would not occur (or at least, become uncontrollable) as there would be no situation of too little or too much money chasing too little or too many products.

      • Tying the controls to the productive capacity of the economy means governing the tax level according to desired levels of inflation and unemployment.
        Inflation > 3% ==> taxes too low
        JG work force > 4% ==> taxes too high
        That should satisfy concerns about unlimited “money-printing”.

        • On the contrary Golfer, – how many people really trust the Government to define both “inflation” and “unemployment”? We all know those two statistics are manipulated, but that can apply to virtually any set of statistics.
          Somehow, and I don’t know the answer to this, there needs to be a way to set up controls that are independent of the Government. When it comes to the parameters I suggested above, one possibility would be to develop an assessment from the published aggregate of each individual State, in such a way that the calculation is taken out of the hands of the Central Government and Congress.
          There is also an educational process involved here, which must embrace the general public so they are well and truly in the loop and aware of what “money creation” really is and how it works.
          It affects everyone, and the issue isn’t a subject that can be made exclusive to academia and economists. In truth, there is nothing ‘mystical’ about creating a money supply for the nation, and MMT and people like Warren Mosler are in the forefront of explaining the process in clear and straight forward terms.

          • I have no objection to using a third-party, independent, more trusted organization to measure and publish the numbers. Or even to different thresholds or some degree of discretion in the reaction to them. I have proposed a committee structured like the Federal Reserve Board of Governors which would make small adjustments to a broad-based, low-rate tax (business gross receipts, for instance) in order to manage macroeconomic policy.

            There is a more insidious problem, though, if the government is not trustworthy. In that case, the electorate needs to replace them with more trustworthy leaders. As they say, in a democracy you get the government you deserve.

            And I agree education of the electorate is key to the success of MMT as well.

  9. The 99% and MMTers have no response to the term, “money printing,” which scares people. It’s that simple. Neutralize the fears surrounding “money printing” and we win.

    • Sure we do. We can say, so what? Why does that matter? And then they’ll say Weimar! Zimbabwe! And we’ll explain that they’re not like the US an why.

  10. An excellent piece, J.D.!

    To the site administrators: I think y’all should ditch moderating comments. It’s hard for us to have a conversation. That said, I have noticed that this site no longer posts comments from trolls, which is appreciated. You rock; I’m just making a humble suggestion. Cheers!

  11. This is just a suggestion as to how you might introduce your objective – there is no point in using the MMT label if the article is directed to people who have never heard of it. Similarly, there is probably also a lot of people who don’t even know what the term “fiat currency” means, as so many of the 99% believe that money is still, somehow, tied up with gold. So, maybe, rather than using “fiat currency” we should just talk about “the money system”?
    There is a message that is urgently needed to be brought out into the bright light of day – it’s a simple message with three objectives: –
    1. To explain how the current, internationally used, fiat currency system actually works
    2. To counter the lies and deceit that is used around the world to hide the facts about the fiat currency system available to every monetary sovereign nation
    3. To explain how the fiat currency system can be made to work for the benefit of all the nation’s people, and not just the elite 1%, as now happens.

    • Guzzie, I agree.

      MMT authors, proponents, etc. must go on the offensive and aggressively challenge mainstream pundits by name, organization and quote their words. Then challenge these troglodytes to contradict MMT’s fundamental premises.

  12. Richard D Wolf has some good answers to why the 99% has no significant influence on politics of money.
    First 10 min is powerfull

    http://rdwolff.com/content/global-capitalism-november-2013-monthly-update

  13. Matt – The federal government must “finance” its spending by law, which is why it sells treasuries. The banks utilize their US Dollar creation abilty to purchase treasuries basically at the demand of the US treasury. The Federal government never has to realistically worry about “funding” their spending because the banking system accommodates its needs. However I have never heard of a bank every stopping a meeting with a client of any size to check and see if they have enough money to loan out. The banks do not have this restriction. The federal government depends on this abilty that the banks are allowed to have to fulfill the requirement to fund their spending. As I said before the federal government could alter the operational functions to operate as suggested but currently do not.

  14. Quite an ambitious project. Enjoyed this a lot.
    An excellent tool for understanding the mechanism of how government creates fiat money is this video:

    http://www.dailypaul.com/302583/mike-maloneys-hidden-secret-of-money-ep4-has-landed-the-biggest-scam-in-the-history-of-mankind-debt-ceiling-truth

    While some of the graphics are hokey, the information and the way it’s presented is clear, concise and even our junior high students were able to understand it. It’s great when our daughter in the eighth grade can sit down and explain the workings of how the Fed creates money to grown men and women at a dinner party who have absolutely no idea how things work.

    Do you?

  15. JD. the term “fiat currency” while correct has bad connotations now.
    I use two factual clarifications.
    I don’t say “gold standard” without the explanation that this means FIXED EXCHANGE RATE. This is like Price-Fixing, like the Govt setting the price of a gallon of milk at $3.00, by an EDICT of politicians.
    Under Fixed Exchange, the price of $1.00 was set at 1/35 oz of gold, and the price of gold at $35.00.
    That was the “standard”, a fiat currency of Dollars PLUS the overlay of a Fixed Exchange mandate on top of that.

    When Nixon abolished the Fixed Exchange Rate, which only applied to foreign dollar holdings, the Treasury was no longer required to give out tobacco, chickens, scarce JEWELRY, or any other tangible assets to dollar holders. They only ENTITLEMENT they were allowed to claim for dollars was Tsy Securities, what we also call “national debt”. This was a kind of monetary “coup”, not a failure.

    Instead of Our Govt being forced to buy scarce jewelry to fund operations, it could simply PAY anyone dollars and stop worrying. Now Dollars are on a FLOATING EXCHANGE rate with other currencies, which means the MARKET decides, and politicians willingly manage the floating exchange rates within parameters to facilitate easy foreign trade.

    Otherwise, “fiat currency” sounds like RECKLESS money printing. And why is money printing not a problem?

    The author of the Quantity Theory of Money (Irving Fisher) “debunked” his own hypothetical theory by explaining that it only applied to a totally-rigid static economy, more rigid than the USSR. In this scenario, more Demand would not result in more jobs or more output, which would reduce prices. In a hypothetical rigid non-growth economy, more demand would cause higher prices for the same fixed output.

    No market economy operates in that manner. Market economies naturally expand output and hire people to meet more demand and more customers. This also means we shouldn’t use a 6th grade algebra story problem equation — MV=PT with V and T fixed — to describe how a real world economy functions.

  16. Nick that’s completely false. That’s the myth JD is fighting.

    US Bonds DO NOT have to be paid back by future taxes, and the creation of the Fed and abolition of the Fixed Exchange Rate by FDR and with Nixon doing the final divorce means that FEDERAL TAXES could be all but ABOLISHED, at least as a source of revenue.

    MMT points out that taxes are necessary for creating value for fiat currency, for the same reason that an NFL ticket would have no value if there were no gatekeepers collecting tickets at the entrance, and letting in all the fans for free.

    Sticking with the NFL analogy, those are “fiat tickets” which are printed on worthless paper, evidenced by the fact that they are torn in half and thrown away. They retain no value after the game. Would we require the NFL to print tickets in gold leaf ink, or retain a stockpile of gold for ticket refunds? How else would a 2013 NFL ticket retain it’s value in 2023? Of course that’s stupid, NFL tickets are fungible at the time, nobody expects the tickets to retain value.

    Keynes said, money is like a ticket to the theater, the value is the performance, not the paper it’s written on. Think of US money as the means of doing commerce and getting rich in America, and the taxes are like the entrance fee charged to participants.

    Why do some DEMAND the right to PLAY to WIN in the US economy for free, and think they have an ENTITLEMENT to get very very rich by accumulating US Dollar financial assets and other various assets without paying any dues to the USA for the privilege?