Steve_American wrote:1] Yes, you are right, but that is what MMT says.
Oh? Where does it say that?
MMT also says that taxation is what gives fiat money its universal value inside a nation.
Also not quite correct. It is the fact that fiat money is considered to settle
all legal obligations that gives it value.
2] OK, define "will not work".
It won't have the intended effect of reducing inequality and providing productive employment to all.
IMO, the JGP will certainly work in that it will give a job to everyone who wants one.
Be careful what you wish for. What good will all those "jobs" do if landowners just charge everyone that much more rent for permission to access the enhanced economic opportunity (which they will; why not?) and the people holding those jobs aren't actually producing anything of value?
So, all people who are not working are doing it by choice.
People having jobs and "working" does not solve the problem. The advance of AI means that more and more people will be unable to do
any job better than a computer. At what point will you give up and admit that jobs aren't the answer? When 50% of the workforce is performing busywork that machines could do better, faster and cheaper? 80%? 95%?
100%?
It isn't a terrible min. wage job either. At $25/hr it is 2.4 times the current min. wage in the US.
It is a band-aid to avoid dealing with the real problem: privilege, especially landowner privilege.
Maybe you mean that it will cause inflation. If so say so and explain how it will.
It will cause inflation if the money diverts resources from more productive avenues and net money issuance consequently outstrips production.
3] Yes, banks creating money is destabilizing. However, some element in the economy must be adding money to replace the money going into savings.
In a correctly designed monetary system, savings are lent or spent back into the economy because they will buy more desirable goods and services now than later.
Also, money used to buy stuff from overseas. This was a huge problem way back in the 13 colonies. England wanted taxes paid in gold or paper English money. So, there was always a shortage of hard money. Nobody understood the economy then like MMT does. [See, i.e., google "the paradox of thrift".]
This is a problem because the US$ has the exorbitant privilege of being the international reserve currency, and circulates unregulated in many other countries. All national currencies should float, and the market determine their exchange rates.
MMT says to look at the EU & EZ for great examples of how a lack of growth in the money supply strangles national economies.
The money supply has to grow to accommodate economic growth, and the euro is a good example of why money is rightly the responsibility of national governments, not international banksters.
IMO, MMT doesn't misunderstand the problems.
But you are wrong, and if MMT proposals are actually implemented as policy, you will see the proof that you are wrong. The problem is
privilege, especially landowner privilege. MMT is a band-aid. Whenever you see anyone pooh-poohing the role of land in economic and social problems, as MMTers all do, you know you are dealing with either economic ignorami or disingenuous apologists for greed, privilege and injustice.
And spending money on many problems will actually solve them.
Not when it just makes them worse, as the US medical care system proves.
There are only 3 kinds of money. Gold, etc., fiat money, and debt money.
Nope. Five: commodity money, fiat money, deposit money, debt money, and (maybe) crypto. Deposit money is created when customer savings are deposited in a bank. The difference between deposit money and debt money is that the bank's balancing asset is cash, not a loan, and deposit money doesn't have to be erased according to a principal repayment schedule as debt money does. Crypto is a topic for another thread, and its nature and ultimate role are still unclear (but FTR, I am skeptical).
. . . a] Banks create debt money with loans if they are allowed to. Pawnbrokers don't create money because they are not allowed to.
Bank lending inherently creates debt money because the new loan asset has to be balanced by a new liability. The point is to prevent that creation of debt money from increasing the money supply, by requiring private commercial banks to hold 100% reserves to cover demand deposits and maturity-matched assets to cover all their other liabilities. That way, they have to remove the same amount of money from the money supply as the new money they create with the loan, and can then bring it back into the money supply as the loan principal is repaid.
. . . b] Gold money can't increase so it strangles the economy.
Commodity money such as gold can most certainly increase, and has distinct advantages such as negative feedback and not being controllable by governments. But we can't get there from here: any attempt to return to using gold as money will be deflationary (Bitcoin is even worse).
. . . c] Fiat money is the answer.
Correct. But it should only be issued by an independent Mint whose sole mandate is price stability as measured by a commodity price index weighted by value of final deliveries. Such a Mint would issue enough money to the Treasury to be spent into circulation as needed to keep commodity prices stable. This would result in a slow (~1%) inflation relative to wages and consumer goods and services.
Frankly, the world has had a fiat money system since the end of WWII.
No, it has had a hybrid system of fiat, deposit, and (mostly) debt money, with a commodity (gold) element until 1971.
The thing is that most fiat money today is not debt money, because for example 45% of the Japanese national debt is held by the BOJ, so when the Japanese Gov. pays the BOJ when a bond comes due, the BoJ turns around and pays all or over 97% of the payment back to the Japanese Gov.
Debt money is created by private commercial banks when they lend, and is erased by principal repayments.
. . . The rest of the money isn't debt money because it can be (and must be) rolled over FOREVER. See my thread on why this is.
It doesn't have to be rolled over forever. It can -- and should -- be replaced with debt- and interest-free fiat money.
. . . . . The main reason is that taxing that much money out of any nation's economy (US, EU, UK, Aust., Canada, Japan, etc) will stop almost all spending and crash the economy.
Yes, deflation is much more dangerous than inflation.
You can add money at a reasonable rate into an economy without hurting the econ., but there is no rate at which you can extract it from an economy without crashing the econ.
No, that depends on the relationship between money and production. Variations in production and the balance of external trade can extract money from an economy without crashing it.
This is because there is a big gap between -0.001 (a small rate of removal) and +2.000 (the normal addition rate). Slowing the removal rate to +0.500 is not extracting money from the economy, it is just slowing the adding; and econ. history shows that this rate of adding $ will cause a recession. So, my point is proved.
You risk confusing cause and effect. Declining production can remove money from the economy, but that doesn't mean the removal of money caused the decline in production.
That is your opinion.
Yes, and it is a reasoned and informed one.
My opinion is it is the bribes, because without the bribes in the 50s, 60s, and 70s, the Gov. worked just fine.
No, it did not. It just worked better than it has since then. But the problem of privilege was still festering, and was bound to get worse.
The Gov. followed the rules established by FDR and the New Deal, and it worked wonderful. It was the best time in human history for the masses (in the West at least) to be growing up.
But the storms were brewing even then. The greed and power of the privileged cannot be allowed free rein if we want good times to last.
Then, in the late 80s the USSC ruled that spending money was a part of free speech, and it struck down the antibribery election finance laws.
Then how do you explain the fact that inequality has also got much worse in other countries like New Zealand, Sweden and South Korea, where Citizens United is completely irrelevant to the electoral process?