What gives money its value? PBS explores. You can check it out here.
By L. Randall Wray
I recently did an interview for Euro Truffa on six topics related to Modern Money – MMT.
They are transcribing my interview to Italian and putting up the videos (I think that only two are up so far). However, they have also posted all of the videos to YouTube.
As you can tell, I did not realize they were recording the video—I might have tried to sit still if I had known. Also, the coffee had not quite kicked in so I was not entirely awake. Here are the links with just a brief indication of the topic for each.
By J.D. ALT
In an earlier essay I suggested we just forget the 1%. This was an idea not entirely supported by the commentary that followed. On reflection, I’ve decided it isn’t the right approach after all. What we really need to do is rescue the 1%.
They may seem like the last people who need rescuing, but when you consider the facts it becomes clear they really do need to be tossed a life-preserver. The problem is their basic business model is self-annihilating. This is not a new observation in history, but it is worth thinking through again. CEOs and board members are required by fiduciary law to maximize profits for their shareholders. If they fail to aggressively pursue this goal with every business decision, they might actually get sued by an angry shareholder deprived of his maximum return on investment. So maximizing profits is the order-of-the-day—every day. This imperative has been dramatically reinforced (and distorted) over the past three decades—as explained and illustrated by William K. Black—by evolving corporate compensation rules awarding huge bonuses to upper level managers based on the short-term profits their business and “accounting” strategies are able to generate.
Euro Truffa (eurotruffa.it) interviews Randy Wray about MMT in this video from March 13, 2014. After the Introduction which is presented in Italian, the questions are presented in English with Italian subtitles.
By J.D. Alt
All this talk about the 99% versus the 1%? I say the easiest—and likely the most useful—thing to do is just forget the 1%. Write them off. Let them have their gated communities, their mega-yachts, their island retreats and off-shore bank accounts. What do we need them for?
For one thing, we DON’T need their money. Even if we could get it—which we can’t because they steadfastly refuse to use it for anything other than casino gambling in their private and secretive financial networks. We wonder why we have a “jobless recovery”? Does it have anything to do with the fact that such a large percentage of our “capital” has, for all practical purposes, been removed from the economy?
By L. Randall Wray
To Fix or To Float, that is the question.
MMT argues that a sovereign government that issues its own “nonconvertible” currency cannot become insolvent in terms of its own currency. It cannot be forced into involuntary default on its obligations denominated in its own currency. It can “afford” to buy anything for sale that is priced in its own currency. It might be able to buy things for sale in foreign currency by offering up its own currency in exchange—but that is not certain.
If, instead, it promises to convert its currency at a fixed price to something else (gold, foreign currency) then it might not be able to keep that promise. Insolvency and involuntary default become possible.
By J.D. Alt *
I’m most appreciative of the comments and suggestions that followed my recent post. The comments were so encouraging I decided to expand the essay slightly and turn it into a small eBOOK available on AMAZON. I did my best to incorporate many of the commentary’s suggestions. For example, I tried to minimize the problem of reinforcing the “wrong” ideas in my effort to debunk them—a problem rightfully and forcefully pointed out not once, but twice, by Bob Eisenberg! I did not go so far as I think he would have liked, but I did incorporate a warning, just prior to the “incorrect” diagram, advising the reader not to get too enamored with it because it was INCORRECT, and the purpose of the eBOOK was to explain why.
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.
By J.D. Alt
5. TREASURY BONDS—Are they really what we think they are?
Recall that in the old diagram we started out with—the one Congress seems to be using as a guide for its budgeting process—Treasury Bonds appear to be the mechanism by which the Federal Government “borrows” Dollars from the PS pot. Since we now understand that a Dollar is actually the Federal Government’s I.O.U. for tax credits, we can also see that it is illogical for the Federal Government to “borrow” these I.O.U.s. Why would it “borrow” its own I.O.U.—something it can instantly create any time it wants by simply saying, “I Owe You”? If that is the case, why does the FG “sell” Treasury Bonds?