- 30 Oct 2018 10:06
#14958355
I hold these statements as obviously true ---
1] Gold has real valuse because we all agree it does.
2] In the 1800s so called Bank Notes were IOUs issued by local banks and they were IOUs.
3] In the 1960s when I was in high school, all the US paper money was IOUs. The $1 bill was a silver certificate and the Gov. promised and to give you (and did give my dad) a bag full of silver pellets for them. Larger size bills could easily be converted into Ones so you could get sivler for them also.
4] Through all this time the US Gov. sold US Bonds and T-Bills and everyone (then and now) saw them correctly as IOUs. Everyone knows that the US Gov. does not to get them back to be able to reuse them because the US Gov. can create new ones when it needs them.
5] The US Gov. went totally off the Gold Standard in 1971.
6] In a friendly poker game where IOUs are allowed, the issuer of an IOU does not need to get it back from the borrower to be able to issue another IOU. He can just create another without limit. It follows from that, that when an IOU is redeemed by the borrower with cash during or after the poker game the IOU in some sense ceases to exist. That is, the issuer has no need to save it because he can create another one and keeping it runs the risk of someone getting it in some improper way and demanding payment. So, they are often torn up as soon as they are redeemed.
7] Today there is some confusion about if the dollar bills we use are still IOUs.
I don't understand this confusion. The US Gov. promises to give you $1 off whatever you owe in taxes for your dollar bills or dollar denominated bank deposits. This is still “something”. MMT makes a big deal out of this and uses it to explain just why we all accept dollars as being as good as gold (sort of). We didn't always do this you know. [Well, maybe you don't know.] During the Revolutionary War and until Washington became President there was a law on the books that made US issued paper dollars legal tender; however, these dollars were not accepted at par. They were reduced in value because the Gov. had no gold to back them and (under the Articles of Confederation) had no power to tax the people either.
. . So, I accept the MMT assertion that it is taxes that gives dollars their value. That is why we accept them as being as good as gold. Even people who don't pay any taxes to the US Gov. still accept them as being as good as gold because they KNOW that people with more money than them (like a store owner) will take their dollars because the store owners do pay taxes and so they need them for that as well as to buy their stock to sell from their distributors, who buy the stuff from the manufacturers, etc.
I hope I have convinced you that US paper money is still IOUs.
. . Now the question becomes --- are dollars the same as IOUs in a poker game and cease to exist as soon as they reach the issuer? In this case the issuer is the US Treasury or the Fed. Res. Bank depending on who you think issues the dollars. It doesn't really matter though because the Treasury deposits them into its bank account at the Fed. Res. Bank.
. . So, do you think that US dollars are destroyed when you pay your taxes with them? And so, then must do all its spending with newly issued/created dollars.
. . Or, does the US Gov. need to get your dollars away from you to spend them? Either with taxes or by borrowing them from you?
,
1] Gold has real valuse because we all agree it does.
2] In the 1800s so called Bank Notes were IOUs issued by local banks and they were IOUs.
3] In the 1960s when I was in high school, all the US paper money was IOUs. The $1 bill was a silver certificate and the Gov. promised and to give you (and did give my dad) a bag full of silver pellets for them. Larger size bills could easily be converted into Ones so you could get sivler for them also.
4] Through all this time the US Gov. sold US Bonds and T-Bills and everyone (then and now) saw them correctly as IOUs. Everyone knows that the US Gov. does not to get them back to be able to reuse them because the US Gov. can create new ones when it needs them.
5] The US Gov. went totally off the Gold Standard in 1971.
6] In a friendly poker game where IOUs are allowed, the issuer of an IOU does not need to get it back from the borrower to be able to issue another IOU. He can just create another without limit. It follows from that, that when an IOU is redeemed by the borrower with cash during or after the poker game the IOU in some sense ceases to exist. That is, the issuer has no need to save it because he can create another one and keeping it runs the risk of someone getting it in some improper way and demanding payment. So, they are often torn up as soon as they are redeemed.
7] Today there is some confusion about if the dollar bills we use are still IOUs.
I don't understand this confusion. The US Gov. promises to give you $1 off whatever you owe in taxes for your dollar bills or dollar denominated bank deposits. This is still “something”. MMT makes a big deal out of this and uses it to explain just why we all accept dollars as being as good as gold (sort of). We didn't always do this you know. [Well, maybe you don't know.] During the Revolutionary War and until Washington became President there was a law on the books that made US issued paper dollars legal tender; however, these dollars were not accepted at par. They were reduced in value because the Gov. had no gold to back them and (under the Articles of Confederation) had no power to tax the people either.
. . So, I accept the MMT assertion that it is taxes that gives dollars their value. That is why we accept them as being as good as gold. Even people who don't pay any taxes to the US Gov. still accept them as being as good as gold because they KNOW that people with more money than them (like a store owner) will take their dollars because the store owners do pay taxes and so they need them for that as well as to buy their stock to sell from their distributors, who buy the stuff from the manufacturers, etc.
I hope I have convinced you that US paper money is still IOUs.
. . Now the question becomes --- are dollars the same as IOUs in a poker game and cease to exist as soon as they reach the issuer? In this case the issuer is the US Treasury or the Fed. Res. Bank depending on who you think issues the dollars. It doesn't really matter though because the Treasury deposits them into its bank account at the Fed. Res. Bank.
. . So, do you think that US dollars are destroyed when you pay your taxes with them? And so, then must do all its spending with newly issued/created dollars.
. . Or, does the US Gov. need to get your dollars away from you to spend them? Either with taxes or by borrowing them from you?
,