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.
Part one of the post was picked up by Naked Capitalism, and the commentary there had a very different and interesting flavor. By far the greatest criticism was the observation that the central premise of the diagrams was, in fact, wrong: the Private Sector does in fact create the money the FG must use! Many of the proponents of this position seemed extremely well informed, falling into two different but overlapping camps. First were those focused on the idea the sovereign government had given up its money issuing powers to the banking industry—with the Federal Reserve and Treasury, in essence, being controlled and manipulated by the private banking industry. The second perspective was that the banks in fact do create trillions of Dollars in “debt money” which are real financial assets in the Private Sector pot—so, in that sense, the PS pot does “create” its own money.
There is truth in each of these positions, but I decided not to attempt to unravel it with the diagrams. I added an acknowledgement of the “bank money” created by the reserve banking system, but noted that “bank money” is never used to pay Federal Taxes—or for Sovereign Spending. I decided that wading too far into the weeds would just confuse the basic simplicity of the description I’d developed and diminish its effectiveness as an introduction to MMT. To that end, I added the following introduction to the eBOOK:
What’s this eBOOK about?
Many economists and budget theorists are now debating the realities and implications of a new understanding about MONEY. Modern Money Theory (or MMT) is a term that pops up more and more in mainstream discussions about our current economic malaise and National Budget. On the one hand, the new understanding seems to hold out great possibilities, but on the other it seems highly improbable, if not impossible. There is a great deal of disagreement even amongst the economists themselves—and for those of us who are not economists, the topic seems overwhelmingly complicated.
This small eBOOK is an attempt to illustrate the basics of this debate for the “non-economist”. My hope is that by making the basic concepts more visible, the topic—and its remarkable implications for our National Budgeting process and collective well-being—will become more widely discussed.
The illustrations and explanation were first created for New Economic Perspectives, a website and blog at the University of Missouri KC School of Economics. Under the leadership of Dr. Stephanie Kelton and L. Randall Wray, NEP has moved to the forefront of a world-wide effort to inform political leaders, economic thinkers, and engaged citizens about the realities and possibilities of the “modern” fiat currencies we use today. Readers interested in going beyond the basic concepts illustrated in this eBOOK will do well to go to the NEP website: www.neweconomicperspectives.org
So if you want to contribute to the effort, please go to AMAZON and write a review of DIAGRAMS & DOLLARS! If it gets lots of interesting reviews, maybe a lot of people will read it.
[* Post revised to reflect new e-book cover]