Monthly Archives: January 2019

An American Budget


Let’s imagine pulling together a group of enlightened economic planners to create an American budget for, say, the years 2020-2024. What might they come up with? To begin with, how might they even go about thinking about how to create an American budget?

It’s not so obvious as, for example, the way the Congressional Budget Office might go about it. The CBO would begin by tallying up how much money America’s government will have to spend in the years 2020-2024. Then they’d allocate those projected dollars to various pots of spending—with some calculation about what the spending needs will be for each pot. In the middle of this exercise, they’ll discover that the spending needs for the pots far exceed the number of dollars they’ve projected America’s government will have to spend. So, they’ll tweak the tax revenue numbers, projecting that economic growth in this or that sector will generate more tax collections for the government, and they’ll search for a bevy of cost-savings the government can garner by eliminating “wasteful” spending. Then they’ll repeat the allocation exercise and discover the projected available spending dollars are still far short of what they’ve calculated the pots will demand. Thus they will next have to calculate how many dollars the American government will have to borrow to make up the short-fall—and will have to further calculate how much that borrowing will add to the “national debt,” and how many years (projected into a distant future using imagined numbers for economic growth and future tax-rates) will it take for America to repay the debt. Then they’d publish all these numbers and Congress would blanche and fall into chaos and confusion. The political party out of power would declare the party in power to be “fiscally irresponsible,” driving the nation to bankruptcy, and the arguing would begin over which pots should be reduced or eliminated. Another day in the life of American politics courtesy of the Congressional Budget Office.

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Understanding Modern Money – Video

Randall Wray presents in English the German version of his book “Understanding Modern Money”. The intro is in German, Randy’s presentation is in English.

AOC# and MMT Spook the AEI

William K. Black
January 17, 2019     Bloomington, MN

AOC# drives Republicans berserk.  Booing her, and only her, at the ceremony admitting the members of Congress, raging at her for dancing – yes dancing – in a college video, and attacking her for having a nickname (“Sandy”) in high school demonstrate the degree of derangement and the pathetic ammunition they have found in their failing efforts to discredit her.  MMT has become an indirect beneficiary of this derangement.  AOC# has expressed support for MMT – so the right is now eager to reach the famous second stage of opposition to good ideas (‘first they ignore them, then they attack them’).  It is far better for the right to attack our good ideas, than ignore them.  As with the right’s attacks on AOC#, the nature of their attacks on MMT is laughably extreme and nonsensical.  When they attack MMT, they spread our views.

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MMT’s Opening


I recently read in the WSJ that Modern Monetary Theory is defined as the proposition that the federal government can borrow as much money as it needs so long as the interest rate it pays is less than the growth rate of the GDP. The short article, by Desmond Lachman, went on to argue why this was a dangerously false premise. Thus, MMT got shot with two bullets in one paragraph: first by defining it in a way that negates its most fundamental principle (that the federal government doesn’t need to “borrow” fiat currency in order to spend fiat currency), and second, by declaring MMT to be not only false, but dangerous.

It’s remarkable how stubbornly tenacious mainstream economic thinking is about misunderstanding and fearing MMT. The fundamental belief that refuses to be shaken is that for a sovereign government to spend, it must first claim—either through taxation or borrowing—some portion of the profits of private commerce. This immediately sets in motion complex calculations about what percentage of those profits can be claimed for government spending before the profit-making capabilities of private commerce, itself, are harmed (because the capital that would otherwise be used for expansion, is being appropriated for government spending). When that point is reached, the calculations insistently predict, private commerce will cease to grow—perhaps even shrink—which perversely will then reduce the amount of currency available for the government to claim a portion of; if, under those circumstances, the government continues nevertheless to increase its spending (by insistently increasing its taxing or borrowing), private commerce will be driven to shrink even further, setting in motion a disastrous downward spiral. The calculations, in other words, are structured to demonstrate that government spending per se strangles the goose that lays the eggs—and, therefore, it is rational to argue that government spending should be limited, and specifically that it should not exceed some calculated percentage of GDP (which, of course, in most calculations of this sort, it already does)!

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Trump’s Version of ‘Let Them Eat Cake’

By William K. Black
January 14, 2019     Bloomington, MN

Queen Marie-Antoinette of France was libeled by the claim that when she was told that her starving peasants could no longer find bread to eat, she responded “then let them eat cake.”  (If you want to get precise she supposedly said let them eat ‘brioche.”)  There is no evidence she said any such thing.

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Trump CFPB Plans Obscene Change to Payday Lender Rule

William K. Black
January 14, 2019     Bloomington, Mn

Kate Berry, the American Banker reporter that covers consumer financial protection, has written another important article about the continuing horror story of Trump’s increasingly successful efforts to pervert the Consumer Financial Protection Bureau (CFPB) into an agency dedicated to harming consumers and protecting our Nation’s most predatory lenders.  Unfortunately, her January 14, 2019 article is behind a paywall.

The Predatory ‘Sweet Spot’

The context is one of the CFPB’s most important and useful anti-predatory lending rules by payday lenders.  Payday lenders often charge working class Americans interest rates well above 100 percent.  (In Missouri, a hotbed of predation, they can charge more than 500 percent.)  The ‘sweet spot’ for payday lenders is borrowers who will be unable to repay promptly the initial loan (with an obscene, but vastly lower initial interest rate).  This sets off a cycle of additional borrowing and extending of payday loans that places the borrower into a debt spiral that frequently results in bankruptcy.  Payday lenders, who exist to predate on customers, make their extraordinary profits largely from borrowers who cannot repay the initial payday loan when it comes due, but have some income and will continue to reborrow and attempt to repay for months.  Predatory payday lenders optimize by finding this ‘sweet spot’ of those who have enough income and a compelling intent to repay – but not enough income to pay off the entire series of loans.

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Macroeconomic System for Climate Change

Macroeconomic System for Climate Change

A U.S. Patent Application

Inventor:  J.D. ALT (acknowledging all advocates of modern fiat money)

Assignment:  To all citizens of democratic free societies


A macroeconomic system including the issuing of a fiat currency by a sovereign government; the establishment of a tax regime on the government’s citizens wherein the taxes levied can only be paid with the sovereign government’s fiat currency; the sovereign government’s debiting of its tax collection account to purchase goods and services from its citizens and their commerce; the sovereign government’s issuing of future fiat currency certificates—to be redefined as “treasury bonds”—which it trades, at a discount, for existing fiat currency held in private financial markets; the sovereign government then spending the traded-for existing fiat currency to purchase goods and services from its citizens and their commerce over and above what it is able to purchase by debiting its tax collection account; the management of the value of the said fiat currency relative to goods and services by the general means of draining the currency from circulation through the sovereign tax regime—and by the specific means of controlling the discount and time-to-maturity of the issued future fiat currency certificates (treasury bonds); and wherein the sovereign government’s spending is thereby enabled to be orders-of-magnitude greater than what the government collects in taxes—without encumbering the government with debt, and without devaluing the fiat currency with respect to the citizens’ commerce; said macroeconomic system thus enabling a sovereign government to spend whatever fiat currency is necessary to enable and assist its collective society to mitigate and adapt to climate-change. Continue reading