[Steve_American]

To repay debt, you must create more debt. :?:

Sure but in the context of a global economic system with multiple currencies. Can't one nation effectively default against the currentcies of other nations? Therefore carrying massive debt isn't good.

I can't and won't speak for Solar Cross.
I don't think that you have adjusted your thinking about money to get it in line with the realities of fiat money.
MMT claims that all US dollars are IOUs. Every single dollar is a debt that the US has to its holder. US Bonds are just fiat money that earns interest.
MMT says that what the US has promised you for you dollars is the same number of different dollars. I.e., nothing.
I claim that what the US Gov. has promised you if you present a dollar for 'something" is to write off $1 worth of your tax liability. That is the only "tangible thing" that backs the US dollar.

Because dollars are debt, it is totally impossible* for the US to pay off its debt to the American people. All it can do is exchange one form of debt for another form of debt.

.* . Well, I suppose it could give everyone some gold for their dollars but the amount would be far less than the current value of gold. The debt is $20T (maybe we could exclude $3T owed to the S.S.T.Fund) plus about $4T in cash plus I have no idea how many other real** dollars are in bank accounts, etc. Compare this to the number of oz. of gold the US holds and you get a figure of something like $100 per oz. (or even less). I'm pretty sure nobody wants the US to do that.
** . Here an "un-real" dollar is a dollar that was created by a bank making a loan. The US has no obligation to give out gold for such dollars, I think. Do you disagree?

This is what makes fiat money so different from 'gold standard money'.
And this is what undermines gold standard thinking. Making it an error in thinking.


Crantag, see also my reply to you, It's the very last post on page 2.

[Crantag]

Working backwards ---
We know that the US fiat dollar period started in 1971.
We know that the Bretton Woods period started in 1944.
Is they another period we should insert here?
We know the Mercantilism period began way back when around 1500, +/- many years.

OK, I saw that under Bretton Woods all nations could use gold, dollars or other currencies to pay their trade deficit. However, these all eventually led back to gold. So, the whole system was based on the world's finite supply of gold, ISTM. So, it was a modified gold standard and so the gold standard rules still applied.
So, I said that Dr. Keynes did most of his work between WWI and WWII and this was in that time when you might have a different name for the period (see above), but the gold rules applied. Even after WWII the gold rules still applied.
However, they do not apply now. Not really. But, the US acts as if they do.

The Gold Standard was begun in 1821, and lasted until the end of WW1, basically. It was then resuscitated but collapsed completely in 1931. So there was a period of floating exchange rates between 1931 and 1944.

Keynes infamously called gold an obsolete relic of the past. I think you may have him a little confused.

And by the way, the New Deal and like policies failed to end the Great Depression. The programs failed to have a sufficient impact. It was only WW2 which ended the Great Depression, in part through the overwhelming mobilization of resources, in part through the destruction of capital, and in part due to various other factors. However the Atom Bomb eliminated this type of 'solution'.

An aside on gold. Given population growth, the total amount of gold extant is equivalent to about 14 grams per person, if memory serves. But each new person calls on new demand for goods and services. This is undertalked about.

I'll remind that my own understanding is gold-based currencies never delivered on their promises. But fiat currencies and floating exchange rates are attended by their own issues (among those things which gold-based currencies were hoped to address). It isn't really an easy riddle to solve.

[Steve_American]

The Gold Standard was begun in 1821, and lasted until the end of WW1, basically. It was then resuscitated but collapsed completely in 1931. So there was a period of floating exchange rates between 1931 and 1944.

Keynes infamously called gold an obsolete relic of the past. I think you may have him a little confused.

And by the way, the New Deal and like policies failed to end the Great Depression. The programs failed to have a sufficient impact. It was only WW2 which ended the Great Depression, in part through the overwhelming mobilization of resources, in part through the destruction of capital, and in part due to various other factors. However the Atom Bomb eliminated this type of 'solution'.

An aside on gold. Given population growth, the total amount of gold extant is equivalent to about 14 grams per person, if memory serves. But each new person calls on new demand for goods and services. This is undertalked about.

I'll remind [did you leave out the word here? = you or maybe everyone] that my own understanding is gold-based currencies never delivered on their promises. But fiat currencies and floating exchange rates are attended by their own issues (among those things which gold-based currencies were hoped to address). It isn't really an easy riddle to solve.

Yes, the New Deal didn't end the Great Depression. It took WWII to do that.
However, my response to that is --- I wish we could do some experiments to test Macroeconomics. Specifically, would the New Deal have ended the Depression if it had been 2 times bigger or even 3 or 4 times bigger?
I base this on the fact that WWII saw enough spending to new the Depression, so it might be true that massively more spending starting in 1933 might have ended it sooner.

It is sort of like my response to the movie 'Terminator'. The movie showed that the guns everyone used against him didn't work. The movie didn't prove that much bigger guns would not have worked. Would he be able to absorb a direct hit by a 16" armor piercing shell from a battleship and keep going? I think not. How about a 120mm round from a tank?

As for Keynes infamous remark --- when did he say that? If it was later in his life then it is different from if it was early in his career. I'm just a layman. His theory reeks of gold standard thinking compared to MMT thinking. I suspect that that remark came later on after his theories had already been published. But, as a layman it would be too much work to look to see when he said/wrote that.

As for your last point ---solving the problems --- As I understand MMT the free floating nature of the currency is supposed to correct automatically when the dollar seems to lose some of its value vi sa vi foreigners. If the value of the dollar internationally dropped to half its current value then foreign stuff would cost Americans twice as much but American stuff would cost foreigners half as much. America would need to make more of its own stuff thus creating American jobs [good, right?] and America would export more stuff [also good, right??].

[Crantag]

Yes, the New Deal didn't end the Great Depression. It took WWII to do that.
However, my response to that is --- I wish we could do some experiments to test Macroeconomics. Specifically, would the New Deal have ended the Depression if it had been 2 times bigger or even 3 or 4 times bigger?
I base this on the fact that WWII saw enough spending to new the Depression, so it might be true that massively more spending starting in 1933 might have ended it sooner.

It is sort of like my response to the movie 'Terminator'. The movie showed that the guns everyone used against him didn't work. The movie didn't prove that much bigger guns would not have worked. Would he be able to absorb a direct hit by a 16" armor piercing shell from a battleship and keep going? I think not. How about a 120mm round from a tank?

As for Keynes infamous remark --- when did he say that? If it was later in his life then it is different from if it was early in his career. I'm just a layman. His theory reeks of gold standard thinking compared to MMT thinking. I suspect that that remark came later on after his theories had already been published. But, as a layman it would be too much work to look to see when he said/wrote that.

As for your last point ---solving the problems --- As I understand MMT the free floating nature of the currency is supposed to correct automatically when the dollar seems to lose some of its value vi sa vi foreigners. If the value of the dollar internationally dropped to half its current value then foreign stuff would cost Americans twice as much but American stuff would cost foreigners half as much. America would need to make more of its own stuff thus creating American jobs [good, right?] and America would export more stuff [also good, right??].

I understand you don't have books.

Yet you do have google, do you not?

Those who advocate the return to a gold standard do not always appreciate along what different lines our actual practice has been drifting. If we restore the gold standard, are we to return also to the pre-war conceptions of bank-rate, allowing the tides of gold to play what tricks they like with the internal price-level, and abandoning the attempt to moderate the disastrous influence of the credit-cycle on the stability of prices and employment? Or are we to continue and develop the experimental innovations of our present policy, ignoring the "bank ration" and, if necessary, allowing unmoved a piling up of gold reserves far beyond our requirements or their depletion far below them? In truth, the gold standard is already a barbarous relic.

A Tract on Monetary Reform (1923), p. 172

As I said before, some of the aspects of MMT which you have recently presented sound a lot like Keynesianism.

[Steve_American]

I understand you don't have books.

Yet you do have google, do you not?

Those who advocate the return to a gold standard do not always appreciate along what different lines our actual practice has been drifting. If we restore the gold standard, are we to return also to the pre-war conceptions of bank-rate, allowing the tides of gold to play what tricks they like with the internal price-level, and abandoning the attempt to moderate the disastrous influence of the credit-cycle on the stability of prices and employment? Or are we to continue and develop the experimental innovations of our present policy, ignoring the "bank ration" and, if necessary, allowing unmoved a piling up of gold reserves far beyond our requirements or their depletion far below them? In truth, the gold standard is already a barbarous relic.

A Tract on Monetary Reform (1923), p. 172

As I said before, some of the aspects of MMT which you have recently presented sound a lot like Keynesianism.

Well, as I thought, you could find it a lot easier than I could have.
I would say it was early enough to have taken hold But, it didn't.
I have always understood that Keynes called for a surplus in good times to pay down the debt run up in hard times.
Did I understand wrong?

[Rancid]

What does MMT say about Crypto currency ?

[SolarCross]

What does MMT say about Crypto currency ?

Nothing I would guess because it isn't a fully fledged economic theory just a slight policy modification of box standard Keynesianism, narrowly focused on government issued fully fiat money substitutes like USD, euros etc.

[B0ycey]

I don't think that you have adjusted your thinking about money to get it in line with the realities of fiat money.
MMT claims that all US dollars are IOUs. Every single dollar is a debt that the US has to its holder. US Bonds are just fiat money that earns interest.
MMT says that what the US has promised you for you dollars is the same number of different dollars. I.e., nothing.
I claim that what the US Gov. has promised you if you present a dollar for 'something" is to write off $1 worth of your tax liability. That is the only "tangible thing" that backs the US dollar.

Because dollars are debt, it is totally impossible* for the US to pay off its debt to the American people. All it can do is exchange one form of debt for another form of debt.

Currency is indeed an IOU. The value of it is determined by government assets and confidence in the economy. The US also have the added advantage that the Dollar is used as a reserve currency and used for commodity exchange. Because of the nature of Fiat currencies, it is indeed impossible to be debt free or to need to worry about bankruptcy of your nation (unless you are part of a currency union like the Euro). However, and this is important - Hyperinflation is a factor if all you are doing is printing Dollars for fun btw. I suspect when the Dollar finally loses commodity exchange status like the Petro-Dollar or if China ever flogs the Dollar on the cheap or Trump Trade war destroys global trade and their globalization monopoly etc, because of the amount of Dollars out there, the US are more in danger of suffering hyperinflation more than any other nation if they don't at least get on top of their deficit. And that is because everyone is holding the same thing that is no longer in high demand as it is today because they have already 'printed for fun!'

As for Crypto currencies, they are in essence worthless as their value is solely based that they have value. They are not protected by assets like currency. I am certain that should their be a major recession in the future, investors in it will finally understand they have nothing more than data and end this craze of stupidity like the Tulips of Amsterdam.

[Crantag]

What does MMT say about Crypto currency ?

In China, the majority of people use crypto currency every single day, as the primary means of payment.

You see people pulling out cash as well; but most people don't even carry much cash.

There's no real need for cash; it is quicker to whip out your phone and scan a bar code.

The crypto currency used isn't bitcoin.

It is WeChat Pay or Ali Pay (Alibaba).

One can link their bank card to WeChat or Alipay.

But, there is also a system whereby you can transfer money to be held in Alipay or WeChat. It acts like a savings account, with daily compounding interest (365 days a year), which pays in the range of 4% apr (actually you have to have a Chinese ID card to use this, which means I can't use it. But I use it still as means of payment).

Alipay alone has more deposit volume than all of the Chinese banks.

Put that behind you, and consider this additional important factor.

The money thereby has a constant chain of custody, and never exits the system of finance. Withdrawing cash and then using the cash, is like taking water from a reservoir by way of bucket, carrying that water to a merchant, and then having the merchant dump the water into the same, or a different, reservoir.

The bucket will leak a bit. And moreover, some of the bucket will be poured into water cups, and the cups won't all be drank (spare change anyone?).

That says nothing of the function of deposits as source of investment financing, during the interim wherein the buckets of 'water' are withdrawn.

China is already solving some of the conundrums.

It's a fair question whether China can go all the way.

[Crantag]

Well, as I thought, you could find it a lot easier than I could have.
I would say it was early enough to have taken hold But, it didn't.
I have always understood that Keynes called for a surplus in good times to pay down the debt run up in hard times.
Did I understand wrong?

I sort of thought we'd been over this.

So let me say that I am not an expert on Keynes, and can't give an authoritative answer; but.

I think you are generally right. Keynes though lived in a time of differing circumstances; extreme nonetheless, but rather differing.

That is to say, if we could reanimate him and school him on the current goings on, who knows what he'd think.

He may well reach for a revolver though.

I addressed the point about deficit spending in hard times and paying it down in good times though. Hypothetically, it could be done with a constant tax rate (given corporate and income taxes). I think this sort of hypothetical is essentially what Keynes was on about.

[Rancid]

It is WeChat Pay or Ali Pay (Alibaba).

That's not crypto currency. Those are just cashless secure payment systems like Apply Pay and Google wallet (or whatever its called). My understanding (from the industry I work in, and my Chinese coworkers) is that these technologies do have high adoption rates in China (and other parts of East Asia).

[Steve_American]

[Steve] I sort of thought we'd been over this.

So let me say that I am not an expert on Keynes, and can't give an authoritative answer; but.

I think you are generally right. Keynes though lived in a time of differing circumstances; extreme nonetheless, but rather differing.

That is to say, if we could reanimate him and school him on the current goings on, who knows what he'd think.

He may well reach for a revolver though.

I addressed the point about deficit spending in hard times and paying it down in good times though. Hypothetically, it could be done with a constant tax rate (given corporate and income taxes). I think this sort of hypothetical is essentially what Keynes was on about.

OK, thanks.
My layman's gut feeling is that without raising taxes any surplus in good economic times will not be enough to pay off the debt created by the deficits of the bad economic times. Paying off the debt from increased unemployment insurance payments seem fine to me.
However, paying off the debt from larger infrastructure projects [undertaken party to create jobs] should not be paid off or down. The people worked in good faith and taking their pay later seems wrong. [Like in the analogy story of the family I wrote above.]
Also, debts run up in wartime [like WWII] should not be paid off or down for the same reason.

MMT says that the US should never run a surplus. That in good times spending should be increased on infrastructure to spend the surplus.
MMT calls for tax increases only to suck cash out of an overheated economy that is suffering with high inflation and where the inflation is the result of high demand rather than short supply. This would only happen in the best of economic times. In this case there may need to be a surplus.

BTW === I watched a Youtube video yesterday where Stephanie Kelton [the MMTer] said that the Cato Institute [IIRC] did a study of *every* case of hyper inflation ever recorded in history. And they reported that there were *56 cases*. And not even one of then occurred in a normally functioning economy. In every case there was some big problem, usually a short fall in supply.

[Crantag]

That's not crypto currency. Those are just cashless secure payment systems like Apply Pay and Google wallet (or whatever its called). My understanding (from the industry I work in, and my Chinese coworkers) is that these technologies do have high adoption rates in China (and other parts of East Asia).

You missed the savings component. It's not really crypto currency but it is a digital form of money. When you link your bank card and pay out of a bank, it is a cashless payment system. But as I said, there is more money deposited in Alipay than in Chinese banks now, because of higher interest payments, as well as access to the money. It pays around 4% apr, compounded daily (365 days a year), although the interest rate changes day-to-day. When people transfer their money into Alipay or WeChat pay for savings purposes, it becomes a digital form of money. And this is only available in China--and the savings component is only available for Chinese nationals (although it has come to be accepted by vendors in other countries, largely to serve Chinese tourists).

[SueDeNîmes]

So, you think that the US Gov. is just like a family.

Keynesian economics calls for 2 things ---
1] In a recession or business downturn (also in wartime) the Gov. should run a deficit.
2] When the business cycle is roaring along the Gov. should run a surplus to pay off *all* the money it borrowed in the last downturn.

How can I create a comparison of this for a family? Does this sound right?
1] In down times the family should borrow so as to keep spending.
2] Then in better times it should pay off what it borrowed.
Wow, that seems strange. I disagree with the 1st point. It is reckless in the extreme for a family to borrow when it can't make the payments. Borrowing to pay interest is really dumb. But, the US Gov. does it every year.

How about this?
Let's look at the budget inside the family just like the US Gov. budget is mostly inside the nation.

Suppose a family has created its own fiat currency that it uses to pay the children for doing their chores and it taxes the children to motivate them to want the fiat currency. I assume it uses play money that it bought with the parents both being required to sign every dollar bill to make them hard to counterfeit.

Now what?
1] Times are tough. Mom slipped and fell, injured her back, and is stuck in bed for 2 weeks. The parents want the kids to work harder to do her jobs for the next 2 weeks. It offers to pay the kids for the new work. The kids say fine.
2] The parents decide they they don't want to just create new cash, so they offer to borrow cash from their kids and pay interest. The kids say fine. So, every day or 2, the parents go to the kids and give them bonds for some of their earnings. The parents then give the kids the cash they just borrowed to pay them for that day's work.
3] Things seem to be working. The kids give up some of their play time to work doing their mom's jobs around the house. Things are fine. The kids have a bunch of extra fiat currency and extra bonds that they intend to use to slack off their regular chores because they can now easily pay their taxes for some time.
4] OK, mom is back on her feet, but the kids are slacking off. The parents decide to run a surplus to pay off the loan so to speak. So, they raise the taxes on the kids to take back the fiat currency that the kids earned for working harder. And use this new revenue to pay off the bonds.

. . . Does anyone see the problem here? The kids worked for nothing. Yes, their parents paid them more for a while, but then they just taxed it all back.

I think the analogy breaks down at "the kids worked for nothing". The real equivalent of the chores getting done would be the economy not shrinking or slowing down. The kids might not end up with more (nominal) money, but there'd be more actual stuff to buy than if the parents hadn't deficit spent. Remember, the money itself has no intrinsic value.

Re Keynes, IIRC - and it's quite possible that I don't - he initially thought the budget should balance over the cycle, but later softened on that. The latter Keynes said of Abba Lerner's Functional Finance (pretty much MMT) : “His argument is impeccable. But heaven help anyone who tries to put it across”.

[Steve_American]

I think the analogy [your kids working in a family story] breaks down at "the kids worked for nothing". The real equivalent of the chores getting done would be the economy not shrinking or slowing down. The kids might not end up with more (nominal) money, but there'd be more actual stuff to buy than if the parents hadn't deficit spent. Remember, the money itself has no intrinsic value.

Re Keynes, IIRC - and it's quite possible that I don't - he initially thought the budget should balance over the cycle, but later softened on that. The latter Keynes said of Abba Lerner's Functional Finance (pretty much MMT) : “His argument is impeccable. But heaven help anyone who tries to put it across”.

Yes, you have a very good point.
And yet my point still sort of stands. That is, if the later taxes that generate the surplus are really coming out of the pockets of the rich, then the workers end up with the stuff they bought from the rich people's companies. It is the rich who get screwed when the money they got for their stuff is taken later. OTOH, if the taxes that are creating the surplus fall much more on the workers then we are back to it being unfair. The workers worked and got paid and then later either their savings is sucked away or some of their current income is sucked away making them work for less after tax income. Either way it is not fair.
But, you're right, if the rich are taxed then it is much more OK. MMT still says it is unnecessary. So, why do it?

To your 2nd point --- we have to be careful to keep in mind that the current Keynesian economic theory as elaborated by current Keynesians likely will *not* very well reflect all that Keynes said or wrote himself. Saying that Keynes said something different here or there doesn't disprove that Keynesians do in fact say "such and such" now.

[Rancid]

You missed the savings component. It's not really crypto currency but it is a digital form of money. When you link your bank card and pay out of a bank, it is a cashless payment system. But as I said, there is more money deposited in Alipay than in Chinese banks now, because of higher interest payments, as well as access to the money. It pays around 4% apr, compounded daily (365 days a year), although the interest rate changes day-to-day. When people transfer their money into Alipay or WeChat pay for savings purposes, it becomes a digital form of money. And this is only available in China--and the savings component is only available for Chinese nationals (although it has come to be accepted by vendors in other countries, largely to serve Chinese tourists).

Are yo using wechat to spread dissident views?

[Crantag]

Are yo using wechat to spread dissident views?

Nah. I really don't hold dissident views here.

If you are a westerner in China, it seems like the main category of dissident views would be notions of Western political superiority. Either that, or talking about Tibet, Taiwan, or Tiananmen Square (you can talk about these things, but it's better to do so sensibly). I don't really traffic much in any of these things. But doing so will probably just piss people off, if anything.

I don't really know many other dissident topics. I suppose I could think of a few, but what's the use. I guess that as a foreigner it seems hard to have a very informed critical view, except for on things like daily annoyances (there aren't that many). China is a pretty decent place for foreigners, overall.

I think it's a natural phenomenon, but other than paying for almost everything I buy with WeChat, I mostly just use it to talk to girls.

[Rancid]

Nah. I really don't hold dissident views here.

If you are a westerner in China, it seems like the main category of dissident views would be notions of Western political superiority. Either that, or talking about Tibet, Taiwan, or Tiananmen Square (you can talk about these things, but it's better to do so sensibly). I don't really traffic much in any of these things. But doing so will probably just piss people off, if anything.

I don't really know many other dissident topics. I suppose I could think of a few, but what's the use. I guess that as a foreigner it seems hard to have a very informed critical view, except for on things like daily annoyances (there aren't that many). China is a pretty decent place for foreigners, overall.

I think it's a natural phenomenon, but other than paying for almost everything I buy with WeChat, I mostly just use it to talk to girls.

When I visit China, I just stay the fuck quiet about anything political.

[Crantag]

When I visit China, I just stay the fuck quiet about anything political.

Not China. But I once got my head split open by a police baton in Japan for heckling an anti-foreigner demonstration. And yet they didn't take me in, they just gave me a stern warning not to follow the demonstration anymore (I speak fluent Japanese). I actually filmed the whole encounter. As soon as I started filming, a bunch of plain-clothed police officers started grabbing me and trying to block my camera. I didn't know they were police until I watched the tape (it seemed like they obviously were police on viewing). I thought they were protesters attacking me, so I sort of lost it and started yelling shit at them, including "fuck you, don't touch me" in English and Japanese.

Another time, I filmed and photographed a clash between pro and anti-nuclear power protesters in Hiroshima on the memorial day of the atomic bombing. The pro-nuclear (or anti-anti) had a contingency of big guys clad in armor, and at one point they simply attacked the anti-nuclear protestors and started beating people. The police swooped in and arrested several of the anti-nuclear protestors (but none of the anti-antis).

This was all in the heady-days of the Fukushima fallout (literal and figurative). I've calmed down a bit; and there isn't a whole lot that gets me pissed off politically here. Chinese do get involved in politics from time to time, but I think there is a pretty clear line in terms of what is acceptable and what isn't. Ridiculing or demeaning the central government isn't in the range of acceptable behavior, for instance. I think most Chinese are pretty well conditioned in terms of knowing what is acceptable. But really, what do I know. That is just how it seems to me.

[Steve_American]

Do you 2 realize that these last 4 replies have been way off topic?