A big MMT thanks to Donna D’Souza aka Trixie aka @HaikuCharlatan. She has done an awesome job of animating J.D. Alt’s wonderful new ebook Diagrams & Dollars: Modern Money Illustrated. For your viewing enjoyment, Donna’s video is below.
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- Fred Lee Talks About his Contributions to Heterodox Economics April 18, 2014
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- Bill Black and Randy Wray October 21, 2013
- Political Theatre and the Government Shutdown October 2, 2013
- Randy Wray: The Taper, the Debt Ceiling and the Prospects for Growth September 23, 2013
- Stephanie Kelton Talks with Warren Mosler September 4, 2013
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Spectacular!
“Slick” production and I mean that in the best sense.
Love the background music
Two questions, it was said that taxation is used to control inflation. I have the perception that when the Government collects taxes that it then respends the money that it collects. If that is so that would create new economic demands would it not? If new ecomomic demands are created how does that control inflation?
Second in the pot called private wealth is there any way to distinguish between private wealth held by people of the country and private wealth that has leaked out of the country to other countries like Germany or China or Equador or Kenya? I have nothing against people in other countries making a decent living mind you but I am just thinking about the desire by most politicians in some countries to remain in power by being reelected by thier country men which I would think would be decreased if net wealth were leaking out of a country over a long period of time.
I seem to recall being taught about 30 years ago that currency flucuations were supposed to bring international trade in to balance but this idea either does not seem to have held up over time very well or the balance of trade does not get measured very well.
In Canada, we hear the story about government spending taxed dollars a lot, and it certainly is a choice government can make. It doesn’t make much sense to do that for other than political reasons though, as MMT clearly shows. Federal level government is a money issuer, and can just spend where ever it deems it needs to for public purpose, rather than robbing Peter to pay Paul. Taxing to redistribute money makes government money movements more complicated and less transparent than they should be in a democratic society, which can only vote intelligently based on what it can clearly see and follow government doing. Whatever it is they are doing, the evidence provided by our current situation would indicate that inflation has not been well managed.
On the second issue, as Warren Mosler has pointed out, exports represent a real cost to the exporting nation. I take from this, that all international trade needs to be carefully balanced to achieve win-win scenarios in trade arrangements which really can’t be achieved in a largely unregulated trading environment. We have to weigh the importance to our economy the costs of providing our resources and our labor exported against the real benefits of any imports to our own economy and the aspirations of our people . A floating currency doesn’t achieve that kind of balance on it’s own.
Governments the world over seem to be in a mad rush to give up responsibility for the economic well being of their constituents as they guide us down the neo liberal path. Ironically many people feel convinced despite growing evidence to the contrary that somehow benefits them most.
I think that trade do balance, with only couple of caveats, one of them which is that countries that issue reserve currency are in special position. Other countries that want to accumulate more reserves do so by exporting. Idea of ‘export led growth’ is so popular that there is high demand for reserve currencies.
Very good! A constructive criticism though; One person somewhat familiar with MMT but unfamiliar with J.D Alt’s diagrams found it a bit too fast paced to absorb first (and second) viewing. The “Reality check ” part that ends with the cat saying “nope” to private sector creating dollars was a bit confusing for the newcomers to MMT, because it puts the phrase “reality check” in the same image as the false sentence about dollars being created in the private sector.
Good questions, Curt. MMT often does differentiate between money in the private sector of one’s own country and money that goes to other countries. That complicates things, though, so is usually left out of introductory explanations. And inflation has to do not just with how much money is in the economy, but what it is doing too. For instance, if productivity is balanced with wages there is little chance of inflation, so if the government spends money to maintain that balance it can keep the dreaded I at bay. There’s my Econ101 understanding of it, anyway.
Yes sir, one of my favorites: “If a dollar falls in the economy and no one is around to spend it, will it cause inflation?” Media screams YES IT DOES! Yet it never happens. Someone has to spend dollars to cause inflation. Otherwise they are harmless numbers in bank accounts.
If this video was translated into Spanish and the country changed to Argentina, would Argentine viewers have the same response as American viewers?
Yes, a slower pace is needed to absorb the meanings of the diagrams. I like the idea though.
To elaborate on John C’s explanation of the tax thing of tk421.
Hope this helps and hope that I’ m not too far off MMT.
It is my understanding that tax cannot be collected before it is spent by the sovereign government.
Therefore the gov. Does not get money first then spend it.
It’s already spending money.
Yes, “spending” taxed dollars is redistribution not spending, because all the dollars originate with federal spending. It is something, we are led to believe is done however, and the language they tend to use implies that they “spend” these tax dollars. The justifiable example is when other levels of government: municipal, provincial, state, must tax in order to fund roads, hospitals, etc, since they can’t create the dollars (or get sufficient federal transfers). It’s not clear why a federal government would tax then re-“spend” the same dollars though, except for political reasons. Why not just distribute sufficient federal spending correctly in the first place?
Great video! JD hit a home run with the article, and the video does it justice. Shared everywhere.
Reserves never cross the line, and leave the banking system for entry into the real economy. This is obvious, by virtue of the fact that nobody regards currency in the hands of the non-bank public as being banking reserves. But rather, such currency forms part of the money supply aggregate M1.
Commercial banks DO lend out their reserves, but only to other players within the financial system, or to a government agency. They never lend out their reserves to their retail customers.
It’s a bad idea to present what’s become “the truth,” then respond by describing an alternative–even if the latter is honest and far superior.
Instead, lay out your case, and let the agents of the conventional wisdom do the responding, thereby reinforcing your frame.
In real estate, it’s location, location, location. In politics, it’s frame, frame, frame.
Brian,
Interesting take. I still think the video has tremendous value, but you make a solid point.
IMHO, the #MMT insight with the broadest appeal is that federal taxes do not fund the federal government.
“Taxes for revenue are obsolete” from NY Fed chair Beardsley Ruml in 1946
“…The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. Two changes of the greatest consequence have occurred in the last twenty-five years which have substantially altered the position of the national state with respect to the financing of its current requirements.
The first of these changes is the gaining of vast new experience in the management of central banks.
The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold.”
…
http://www.constitution.org/tax/us-ic/cmt/ruml_obsolete.pdf
IMHO, it’s the kind of “hook” that could draw attention in from all sides of the political spectrum to look at this wonderful video.
So the $700 trillion in derivatives in the shadow banking system were spent into the economy by the government?
Great video – I disagree with Brian Brain if he is proposing that the “conventional wisdom” or the “truth” should not be raised in the video. Its very important to line up the straw men so they can be visibly shot down by the MMT argument.
I wonder if there is a politically correctness in the claim that taxes are merely there to control inflation. I see them, in order to be truly beneficial to society, to also be for the redistribution and reductions in the naturally occurring concentrations of wealth. Wealth attracts wealth, almost by definition. This built-in tendency needs to be tempered.
Paul, thanks. IMHO, a lot depends on the viewer. Different audiences demand different strategies.
I think the video is smashing on so many levels, but that doesn’t mean it can’t evolve or be tailored to different ages, groups.