Tag Archives: fiat money

How Fiat Money Works

By Chris Mayer*

Warren Mosler tells a good story that shows how our economy works at its most basic level.

Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.

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What Would You Have the President Do? Part II, Getting to Full Employment

Responding to a Post at Naked Capitalism by Michael Hudson with some additions by Yves Smith, a commenter, objecting to the criticism of the President’s Knox College speech, issued the challenge ”What would u have him do?” in connection with his promised effort to restore prosperity to the middle class and the poor. In this series I’m giving my answer to that question. In Part I, “Necessary First Moves,” I offered and described two of these. Ending the filibuster, and using High Value Platinum Coin Seigniorage (HVPCS) to fill the Treasury General Account (TGA) with $60 Trillion in reserves. Continue reading

What Would You Have the President Do? Part I, Necessary First Moves

There were varying reactions to the President’s recent speech at Knox College this week. My reaction was that the speech was deeply dishonest in light of the President’s previous policies, actions, and results, and I intended to do a critique, but Michael Hudson and Yves Smith beat me to it. In a fine post at Naked Capitalism, entitled “Michael Hudson Shreds Obama’s Orwellian Speech On Middle Class Prosperity,” Michael Hudson, with occasional added comments from Yves, deconstructs the speech paragraph by paragraph, and sometimes line-by-line, pointing out disingenuous assertions and outright dishonesty. In her introduction Yves remarks on the context: Continue reading

The Smart Bunny’s Guide to Debt, Deficit and Austerity: A Review

One of the most important parts of the collective effort to spread the good news about the Modern Money Theory approach to macroeconomics is popularization of MMT views. We need short simply-stated cultural artifacts that tell people what MMT has to say and what some of its policy implications are for fiscal policy that can deliver a greater measure of economic and social justice to people.

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Sovereign Spending and Public Goods

By J. D. Alt

Based on my new understanding of Fiat Money, I’ve concluded that it is both logical and desirable for the U.S. sovereign government to issue and spend MORE dollars than it collects back in taxes. Doing so accomplishes two fundamental goals:

  1. It enables the sovereign government to purchase from the Private Sector goods and services which will benefit society as a whole; and
  2. It enables the businesses and households in the Private Sector to build up a reserve of fiat dollars which can be used to expand the goods and services available in the Private Sector economy. Continue reading

The Strange Reality of Fiat Money

By J. D. Alt

It is time to come to terms with the fact that U.S. dollars are what economists call “fiat money”. Having acknowledged this—and it’s difficult not to accept it as true since the U.S. abandoned the gold-standard over forty years ago—it might be worthwhile to give some consideration to what “fiat money” actually is and the peculiarities of how it works. Continue reading

The Fable Of The Marbles And The Teacher

By Aitor Calero García

Once upon a time, in a small and remote village across the mountains, in a faraway country, there was a small rural school. It was one of those schools with children of different ages together in a single classroom, a village school like any other, but this is a minor detail. It had a strict teacher. However, everybody in the village loved the teacher, as she was just and fair and she cared very much for her pupils. She was the kind of teacher who gave advice like “you always have to not live beyond your means.”

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