By L. Randall Wray
In Part Three I argued that the government issues currency as its liability and imposes tax liabilities on its subjects/citizens that can be paid in that currency. When taxes are paid, both the government and its taxpayers are “redeemed”. I cited Innes’s argument that the universal law of credit is that the issuer of a debt must take it back. This is the fundamental notion behind redemption of debts.
To be sure, debt is much older than money. No human has ever escaped debt. At birth, you are indebted to your parents, your kin, and your gods. You spend your lifetime incurring new debts and repaying old debts and accumulating credits that are the debts of others. If you earn enough credits, you join the Redeemer and make it to the Promised Land after death; if you don’t you join Satan—the original tax collector–in hell.
Sorry that it has taken me a while to get back to my multi-part series on debt-free money. This is the third part of the current series, although I had previously written several other blogs on the related topics of debt-free money, positive money, and 100% money. See links at the bottom.
This post will focus on the concept of “redemption” as the most fundamental requirement of indebtedness. This seems to confuse readers. For example, Eric Lonergan calls this a “fantastic linguistic contortion”, a “pure semantic confusion”, a “hidden definition slipped in between dashes”.
By Thornton (Tip) Parker
Most MMT advocates probably took months to get comfortable with it. But like a personal computer, one need not understand its innards to use its power. The great power of MMT is its lesson that the federal government can create new dollars by running deficits to do things that should be done. But the lesson is counterintuitive and will be rejected by voters unless it can be explained convincingly in a few minutes. This paper offers five nuggets for explaining it quickly. NEP readers are asked to suggest ways to make the explanation simpler and better.
* * * * *
Most Americans believe the federal government is like a family or business that must live within its income. On the surface, that makes sense and the reasons why it is wrong are complex. Here are five nuggets, or simple ways to explain why it is wrong to voters who will never be economists. They show why federal deficits are necessary. They can be adapted and used as appropriate. Continue reading
This is how the mission of the President’s National Commission on Fiscal Responsibility and Reform was defined by the White House
on February 18, 2010:
The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers. The magnitude and timing of the policy measures necessary to achieve this goal are subject to considerable uncertainty and will depend on the evolution of the economy. In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.
By J.D. Alt
Here is what the HUD.GOV website says about the status of low-income housing in America: “Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing. A family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States.”
By J.D. ALT
Even if we assume the principles of modern fiat money will be generally accepted at some point in the future, we must yet confront the problem that sovereign spending is a difficult issue for market economies. It could easily unfold that even with the new “modern” money perspective in place, a serious recession could still find federal stimulus spending unnecessarily constrained. This difficulty was on full display in the last recession when Obama’s stimulus package was finally passed by Congress—appropriating $800 billion for the federal government to spend—only to then confront the almost burlesque-show entertainment of watching Congress and the Obama administration trying to figure out how to actually do the spending.
By L. Randall Wray
My previous blog sparked a lot of discussion, especially over at Naked Capitalism. I do pity Yves Smith! There’s enough nonsense in the commentary to populate a large nation.
As I have argued, it is very hard to figure out what the debt-free money folks want as they are confused on the accounting, vague on the terminology, and rarely provide details on their proposal. However, a reader has directed me to a fine published article that has mostly got the accounting right, lays out a detailed proposal, and contrasts the proposal against alternatives.
By L. Randall Wray
Some time ago, I labeled the “debt-free money” campaign a non sequitur in search of a policy. (See here.) However, this non sequitur refuses to die. I went on to joke that if they want a debt-free money, they ought to propose that government issue bananas as currency.
I frequently am asked to do interviews and I almost always accept them. However, when I was asked last week to participate in a radio show devoted to debt-free money, I struggled mightily to get out of it. As you’ll see, the program’s producer took my idea of banana republics and ran with it. I thought readers might get a kick out of this exchange (the producer’s emails are in italics, my responses are in bold). After the exchange, I’ll summarize my objections to the notion of debt-free money.
Below is an excerpt from my most recent e-book: Real Fiscal Responsibility, Vol. I: The Progressive Give-up Formula. The book is volume I of II critiquing austerity politics at the Federal level in the United States. It exposes its fallacies, its closed-mindedness and futility, and especially its reliance on wrong-headed conceptions of fiscal sustainability and fiscal responsibility. Continue reading
L. Randall Wray
Yesterday Senator Bernie Sanders gave an important speech in which he invoked President Roosevelt’s “second bill of rights” in defense of his platform. As Bernie rightly pointed out, all of Roosevelt’s New Deal social programs to which we have become accustomed, were tagged as “socialism”—just as pundits are branding Bernie’s proposals as dangerous socialist ideas. You can see Bernie’s prepared remarks here.
Just before Bernie’s speech, I was asked to do an interview with Alex Jensen, on TBS eFM’s “This Morning” English radio program in Seoul, Korea. I was sent a list of questions and jotted down very brief responses. Unfortunately, in our radio interview we were only able to get through a few of these. You can listen to the interview (uses iTunes) here. My interview is #8, Name: 1119 Issue Today with Professor L.R. Wray