November 20, 2010

Guns, Butter, and Bonuses (Money, Deficits, And MMT) 1 of 2

Filed under: Corporatism, Globalization, Sovereignty and Constitution — Tags: , — Russ @ 3:33 am


As we sink into economic depression, everywhere we hear the deficit and public debt crisis alarms summoning us to cut spending, raise taxes (on the non-rich, while those for the rich are cut further), “sacrifice”. This sacrifice is never to be undertaken by those who have already monopolized the vast majority of the wealth of the country. The top 1% of the rich hoard one third of America’s wealth. The top 10% has extracted two thirds. Yet all the calls for “austerity” fall on the lower cohorts, and the lower on the wealth and income scale one is, the more onerous the burden. This is as clear as class war and civil war can get short of the actual shooting.
The question, as in every other case where then non-rich act against their own interests, is why are so many people going along with this scam that there’s such a thing as a “deficit problem”? It’s manifest that no one among the elites actually believes this. Everyone, without exception, of whatever nominal politics, implicitly agrees that this government, sovereign in its own currency, spending in a Depression economy, can spend as much as it wants, at will.
The Bailout, the wars, the Pentagon’s obscene budget, Big Ag subsidies, corporate welfare in general, prove this.
So the only question is, will the government spend at will to further enrich and empower the parasites and criminals, or will it spend to help the productive people?
The only, indirect way in which deficit spending destroys the real economy is that corporatist government spending further empowers the criminals to steal yet more real wealth from the productive people, and it imposes the opportunity cost of spending foregone which could have benefited the people as we sink into an economic Depression.
It’s not really an opportunity cost, though, since that implies a trade-off had to be made. The government could easily spend on guns, bank bonuses, and butter. It could loot on behalf of the corporations at the same time that it spends to restore to the people (“trickles back down”) some of the wealth which was stolen from them. But the spending on guns and bonuses and the refusal to spend on butter are all part of the same class war strategy. As is the whole deficit terrorist line of propaganda.
MMT educators stress the accounting identity involved here. In a closed system where the government runs a sovereign currency, a government deficit or surplus has to equal the private sector surplus or deficit. Adding globalization spreads the accounts among many governments and national private sectors, but the globe itself is still closed. (Indeed viewing globalization as a de facto One World Government in terms of MMT can help highlight the class unity of the global elites and the vicious war they wage on all the world’s peoples.)
The best MMT resources include Naked Capitalism, Warren Mosler, Corrente, Kansas City, and the Billy Blog.
So here’s the right way to look at this identity: If we let the public sector = A, and the private sector equal B, and any surplus on one side must be matched by a deficit on the other side, by accounting identity we have A = B. The real question isn’t the “is A sustainable?” of the deficit alarmists. It’s very clear that every single elite and flack, no exceptions, implicitly claims that deficits in A are no problem at all where A is corporatist spending and B is corporate hoarding and the ratholes of the rich. It’s only to the extent that A still includes any public interest spending whatsoever that they suddenly go into deficit shock mode.
So let’s join this battle but make the terms explicit. Everyone agrees deficits are no problem, and only tactically tells lies in a particular situation (where they want to impose “austerity”). So clearly there are actually two kinds of A = B. There’s A2 as corporatist spending, with the surpluses of B made up of corporate hoarding (let’s call that C); and there’s A1 as public interest spending, where the B surplus could eventually become savings on the part of the people.
So the question becomes, given that we all act as if A is unlimited, will we let the criminals continue to make the identity be A2 = C, or will we compel the restoration of some legitimacy and rule of law by forcing it back toward A1 = B?
So activists can leave aside the “is A sustainable?” question as moot. Instead we say, “for whatever A, and no matter what the posterity of A, the real fight is to smash the A2 = C paradigm, and compel the A1 = B.” That’s given the current political circumstance. As I’ll get to in part 2, the real goal is a healthy economy where the velocity of money would be such that A and B would always be close to equal, with the decentralized money supply always just a little out front of productive capacity, which would always be fully engaged.
For this post, I want to discuss further the reformist nature of MMT and its explicit prescriptions. It’s reformist because it’s based on continued large-scale taxation in the sovereign currency administered by a central government. It recognizes that under our status quo the private banks create money out of thin air, at best in anticipation of deposits. They do not lend multiples of existing deposits, the way the popular misconception has it. MMT states the politically incorrect obvious: Governments could do the same exact thing, and do it far more efficiently. The banks produce nothing but merely erect a toll booth and drag a chain across the river. The government could directly produce the same fiat money the banks do, but wipe out all the middlemen, purge all the rents, and render the money creation and distribution far more rational, efficient, and fair.
We see how apologists for the banksters have no problem with the most profligate spending out of thin air on every kind of bailout and bonus and boondoggle, as long as the money creation out of thin air is channeled through the banks. But they throw a fiscal conservative fit over any spending which might benefit the people. So here the fact that private banks create money out of thin air is a dirty little secret everyone agrees to keep quiet, and no one sees as dangerous. But it’s a scandal if someone suggests the government sovereign in its own currency can do the same thing based on actual economic production.
MMTers just want to do as Alinsky said, “make them live up to their own rules”. The government can freely and openly act according to the exact same principles and practices which it and the banks currently act upon surreptitiously. The difference being that actual stimulus could possibly help reform and restore the productive economy, while bailouts, war, the Pentagon, and all other forms of corporate welfare are purely destructive spending, just cannibalizing what’s left of the principal. The banks don’t manage the money supply toward economic health and a fair distribution. They manage it only toward stealing as much as possible. Pure robbery.
The is antithetical to the standard view that the elite parasites create wealth. The fact is that the productive people create ALL wealth, and a legitimate government would create money to reflect that. A legitimate government would do so for the benefit of productivity and prosperity. This means the money supply should always reflect the capacity of the real economy, and should especially be a vector reflecting productive potential.
An anti-sovereign rogue government, on the other hand, alienates its money sovereignty to banks and even to globalization cadres. It does so for the benefit of parasites and criminals, to put money creation and management in their hands. In this case the criminals hijack the natural fiat money creation to financialize the economy, and/or to artificially restrict the money supply, as in the case of a gold standard (more on that in Part 2).
The truth is:
1. Money is created out of thin air. This creation may or may not be based on the productive capacity of the real economy. The money may or may not be deployed for the benefit of the real economy, as opposed to thrown down rent-extraction ratholes while the real economy depresses and dies. So there’s two kinds of accounting identities, the legitimate, benevolent A1 = B, and the hijacked, destructive A2 = C.
2. There’s no natural limit on rational, effective A1 deficit spending so long as there’s capacity underutilization and unemployment.
3. We do in fact have profligate thin-air money creation and rampant deficit spending, but it’s irrational and ineffective spending. It’s simply the government embezzling from the people and acting as corporate bagman, conveying the loot to private racketeers.
The fact that all this spending is taking place with little objection from the “fiscal conservatives” proves that all their fear-mongering about Social Security and other social spending is a lie.
4. So the rational, moral, and practical course of action is to end ALL corporate welfare and instead create the money and spend it on a real jobs program and a real infrastructure transition to the post-oil age. That’s MMT-style reformism.
The fact that the fiscal terrorists in the media and think tanks get everything exactly backwards proves their malevolent agenda. They’re enemies of the people.
In Part 2 I’ll discuss that further, and explore the real possibilities of this reform agenda.


  1. Good post Russ, this ‘money system’ really needs to be sorted out … some thoughts …

    I understand the mechanics of money creation and the immoral power of debt creation being in the hands of the wealthy gangster elite few (and all of its bogus over leveraged derivative products). And yes, that needs to be eliminated.

    But MMT fails for me because it keeps alive the memes private sector and government sector and immediately sets up a conflict in a society. Its us against them. A against B as you short hand it.

    An ideal society, as an alliance of all individuals, should reflect a collective self interest, a balance of the considerations of the individual and the considerations of the group. That collective self interest should first focus on unity. With that focus on unity one could see that we are the government and we are all one. We should all love ourselves and we should all love our alliance, our government. It should be like one happy family. Given that outlook as a guiding principle, MMT should focus on how best to deliver the money supply more equally between and betwixt its citizens and not begin with the divisiveness of the private sector and the government sector. Frankly that stance makes MMT a bit suspect for my skeptical nature.

    Taking the unity focus would also reveal that the job is more one of eliminating the existing ‘alliance breakers’ in a society that impede that goal of a more equal access/distribution of that money and a more socially responsible use of that money.

    As an example, corporations, in their present structure, as ‘private’ entities, stand as ‘alliance breakers’ because they do not always act in the groups collective self interest, and they should be brought into the alliance fold by putting elected citizens on their corporate boards, making them more family like and socially responsible. The same goes for excessive income and excessive wealth, those who take too much threaten the alliance by putting the rest of the members in the alliance in scarcity and poverty.
    And of course there is the electoral process that continues the disparities of wealth, etc. Taking that unity focus would also reveal that a too centralized government works to break down local family autonomy and that government should have a more decentralized framework.

    So … any new money system, in order to be successful, should begin with unity as a goal, and not accept the aggregate generational corruption of language memes as a starting point. No new money system will work to the benefit of all in the alliance without also eliminating the legacy corruption. Instituting a new money system is an excellent platform to reveal and address those corruptions and eliminate them.

    Deception is the strongest political force on the planet.

    Comment by i on the ball patriot — November 20, 2010 @ 8:46 am

    • You anticipate some of the things I’m planning to write about in part 2, since I agree that the real issue isn’t the privatization of the elitist money issue and management but that it’s elitist in the first place.

      In that sense, MMT does seem to be (inadvertently) furthering a kind of scam, that under corporatism you can meaningfully separate private banks and government at all.

      But by advocating direct government issuance, they hope to find a way to fix that, and get rid of the bank power altogether.

      Comment by Russ — November 20, 2010 @ 10:17 am

    • MMT does not really set up the dichotomy you describe (government sector versus private). That’s something you’re reading in to it, or suggesting others might read in to it. I can certainly see how a casual analysis could lead to that confusion — a very common cognitive error. But the only distinction MMT actually makes is between “Entity A able to create currency at will and impose tax collection” vs “Entity B forced to use currency and render taxes”. It may be a popular conservative meme that government is at war with the private sector — when perhaps they’re more properly described as hand in glove — MMT is silent on the subject. Similarly, there may be popular conceptions that associate government with a known set of agencies or functions, but again that has nothing to do with MMT per se. MMT merely describes the monetary system as it stands.

      Commentators, on the other hand, are free to draw out modern monetary theory to whatever ideological conclusions they desire.

      MMT is well understood and accepted in elite circles. This is plain in both word and deed. The moment Bush took office he began jacking up spending. When the economy slowed he resorted to issuing “tax rebate” checks directly to taxpayers. In the immortal words of Dick Cheney, “Reagan proved deficits don’t matter.”

      Comment by reslez — November 20, 2010 @ 12:54 pm

      • For reslez …
        If MMT is so readily misunderstood as you say, and those confusions are commonplace, it would seem that the onus is on MMT proponents to create some clarity.

        Why would MMT make “the only distinction” between an “able” entity (entity A), that creates and imposes, and, a “forced” entity (entity B), that uses and renders (pays, correct me if that is not your intended use of the word) taxes.

        Why the one “able” and the one “forced” dichotomy of divisiveness? Why the two entities? Or is that something I am just “reading in to it”, or “suggesting others might read in to it”, to use your words?

        How can the two entities be expressed as one entity in unison.

        Or, is it because divisiveness is itself an ideology reflected in present MMT, as opposed to reflecting it as a unifying ideology with changes in MMT terminology.

        Like; debt is OK, as long as ‘we united’ create the money to pay for it and owe it to ‘ourselves united’ in fairness. And … that will be difficult to do with the existing societal structure of; private corporations, piggy rich people , etc.

        I would suggest that as MMT stands expressed by you it is not as ideology free as you claim. It is divisive and faction oriented.

        And also again, before wandering too deeply in the smoke and mirrors of one particular box. The money system is only one sector box of societal woes. They must all be cleansed of past corruption, simultaneously, in order to build a better more fair society. In the money system that will mean MMT will need to express itself in a fairer, less divisive, ideology free fashion.

        Deception is the strongest political force on the planet.

        Comment by i on the ball patriot — November 20, 2010 @ 3:05 pm

      • i ball –

        You’re right that nothing is free of ideology. When something is clearly ready to be used as a tool, to argue that it shouldn’t be used but only observed is to be objectively pro-status quo.

        But I don’t think MMT is divisive the way you say. By its nature it contradicts some of the core lies of neoliberalism: That money creation is based on deposits; that we need the banks to create money; that money creation without risking runaway inflation is constrained by anything other than the capacity utilization of the economy. So in these senses MMT is objectively subversive of this particular status quo, even if any particular adherent disclaims such subversiveness. It means the banks have no legitimacy and shouldn’t exist at all.

        So in those senses it can be a tool toward liberation.

        reslez –

        It seems that either of the scenarios I described – public interest or corporatist – involve the government working synergistically with “the private sector”. The question is whether that’s to be one small privileged part of the sector (the malign corporatist synergy) or the productive people in general. I take it that MMT advocates direct government issuance toward the productive health of the real economy, and is thus an aspiring reform program. I know MMTers argue over this, so maybe I’m giving the idea too much credit as it stands, if it’s still mired in the “describe the world” stage when the point is to change it. I only ever describe the world toward the goal of changing it.

        But like you say, the idea’s ready to be used, and is no one’s property. I’m trying to figure out how to use it.

        Comment by Russ — November 20, 2010 @ 3:37 pm

      • MMT doesn’t advocate anything. It just describes what is. People advocate all kinds of things. Proper understanding of MMT can be used to fund a job guarantee. Or you can use it like Bush II did to fund two wars and tax cuts for the rich. Most MMT popularizers, to their credit, focus on the productive things government could do with it. But you could also just give all those sovereign dollars to banks… like we do right now.

        Comment by reslez — November 22, 2010 @ 6:55 am

      • Ok, so the objection is to the phrasing, “MMT says we should do such-and-such”, rather than “MMT shows how this is done, and that can be done, so let’s do that instead of this..”

        Comment by Russ — November 22, 2010 @ 8:28 am

  2. “The question…is why are so many people going along with this scam that there’s such a thing as a “deficit problem”? It’s manifest that no one among the elites actually believes this.”

    Here’s a bit of a (not so) wild flight of fancy:

    Various social programs designed to help hoi polloi, we know what they are, will be eradicated or otherwise gutted in the next few years. Following shortly on from the austerity bulldozer will be the extinguishing of The “national” debt” by virtue of revaluing the gold holdings of the monetary authorities higher by staggering amounts.

    Just a thought that popped into my head.

    Comment by Edwardo — November 20, 2010 @ 1:47 pm

    • Certainly plausible. That’s definitely what they plan to do with the social programs.

      Comment by Russ — November 20, 2010 @ 3:40 pm

  3. After I posted a comment, it did not appear. I clicked ‘post comment’ two more times and after each click a message appeared to inform me that the message appeared to have already been posted. After an hour or so, I will try again.

    Comment by William Wilson — November 20, 2010 @ 7:32 pm

  4. If you think that Russ has done a hatchet job on MMT from the content of today’s blog, you’re correct. However, I would argue that Russ either did not read enough or he mis-understood what
    MMT is about. L R Wray’s book would indicate that modern money operations are not widely understood even by some government operatives; Warren Mosler would probably agree! As to the ideology, political leanings, cultural biases of the modern money proponents, You may wish to learn that The Political Compass.org site offers an opportunity to more nearly correctly
    characterize your political beliefs. Dr Wm F Mitchell’s score is indicated on the ABOUT tab at billy blog. I have yet to learn whether the other modern money (what Dr Mitchell calls MMT) proponents have taken the test. You may wish to give it a try:


    Test offered at Political Compass.org:


    Wm F Mitchell, Ph D – U of Newcastle, Australia economist; is the head of CofFEE (http://e1.newcastle.edu.au/coffee/)
    The Centre of Full Employment and Equity (known as CofFEE) is an official research centre at the University of Newcastle, AU and seeks to promote research aimed at restoring full
    employment and achieving an economy that delivers equitable outcomes for all. FYI, this organization attempts to explain the benefits vs drawbacks (none, unless you are a member of
    the ignorant economic elite) of adopting a Job Guarantee (JG) program as a component of macroeconomic policy; one of the ways the proposed JG program benefits society is that it allows those workers who are displaced from private sector employment to obtain a job in the public sector (this can permit the displaced workers to avoid losing touch with society; it has many
    other potential benefits to the individual and to society).

    Following is a 1 page summary of billy blog entries:


    Dr Mitchell started the billy blog several years ago in order to permit those who have little and/or incorrect familiarity of economics (with a focus on macroeconomics) to learn; in the
    comments section one reads musings, questions, etc. by people with all sorts of backgrounds. If there is a weakness in the blog it has to do with fact that Dr Mitchell talks about both
    events in the USA, those in Australia, as well as those in other parts of the world. As a non-economist, I look forward to the proposed book which Drs Wm F Mitchell and L Randall Wray are
    writing as it appears to be planned to be published within the next year or so.

    Dr L Randall Wray is currently affiliated with the U of MO at Kansas City [his prior affiliation was with the Levy Institute at Bard College in NY]. He also heads the CFEPS (Center for Full Employment and Price Stability):


    He publishs at several blog spots including New Economic Perspectives [where Michael Hudson, also an emeritus prof of economics at U of MO at Kansas City, Wm K Black, Scott Fullwiler,
    Stephanie Kelton, Marshall Auerback and other promoters of modern money economics articles also publish]. These several economists/financial experts also publish at NewDeal 2.0.org, a
    blog which originates from the Roosevelt Institute which is devoted to carrying forward the legacy and values of Franklin and Elenor Roosevelt.


    Dr Wray wrote the book ‘Understanding Modern Money: The Key to Full Employment and Price Stability’ which is available at Amazon.com and which was recommended to me as an excellent
    introduction. After reading it, I felt that I was prepared to read various economists blogs and start to understand some of the issues, including the stupidity of what is frequently referred to as the ‘neoclassical school’ of economics. [I seem to recall Wm F Mitchell calls
    this school ‘neo-liberal’]


    According to Wikipedia:


    ‘The Chicago school is associated with neoclassical price theory and libertarianism in its support of lower taxation and private sector regulation, but sometimes differs from pure free
    -market economics in the support of government-regulated monetary policy by some Chicago School economists.’

    Without further pursuing the above information at Wikipedia, let me just mention that without pretending to have mastered the field of economics, the discipline continues to be diverse and
    controversial and confusing especially to this novice. However, Drs Mitchell, Wray, Hudson, and their various associates have been/are all engaged in both educational and activist roles
    and they don’t always see things exactly the same way as they come at economics from slightly different perspectives.

    Warren Mosler is a financial expert who has a number of contacts in both government and the private sector. Inspect his site ‘The Center of the Universe’ where I suggest that you
    initially read the ‘Mandatory Reading’ tab contents in full:


    If I understand correctly, after a career as a successful financial manager, Warren spent several years at the London School of Economics and, while there, collaborated with Wm F
    Mitchell on several articles having to do with the Job Guarantee concept.
    Some of your readers may recall Bill Clinton’s efforts to put the jobless back to work; several aspects of that effort were claimed to be novel, however, the program was modified, then
    discarded under GW Bush. The concept seemed to be a laudable one and, if done properly, it may work for both the private and public sectors; however, before it could ever be implemented
    properly, people such as you and others who do not understand modern money concepts have to retrain your minds to understand first principles. Most people who are not professional
    economists simply do not know what the stumbling blocks are; many professional economists are confused because they do not understand how modern money matters are actually conducted. By the way, L R Wray says that understanding modern money operations are key to understanding how the system could work; currently, it cannot work as it should because of archaic practices/ideas which the Congress perpetuates but does not understand (or, maybe, because they are also a bunch of incompetents).

    In the Spring (April 28-29 of 2010), billionaire Pete Peterson funded the private so-called ‘deficit hawks/sustainability’ meeting in Washington D C; that included many politically
    connected/ powerful people. One of the outcomes was the Obama-appointed “cat food” commission proposal which benefited from the input of the various and sundry ‘deficit hawks’. About a
    week or so prior to the above secret meeting, Dr Joe Firestone and others who collaborate on the promotion of understanding of modern money operations organized an open meeting at G W University in Washington D C which was held on April 28,2010. That meeting was called the ‘Fiscal Sustainability Teach-In and Counter-conference’


    and results are available at several links including:


    You may wish to initially listen to the videos at the last-listed site as there is a note that they may not be available at this site much longer; do a google search and you will find these
    video or audio files elsewhere. The notice reads:
    [YouTube Groups will no longer be available starting December 1, 2010. Thanks for using Groups and we hope you’ll try our new group features coming soon. If you have any questions please read this help center article.]

    As Warren points out, the leadership (Obama administration and Democratic decision-makers) apparently do not understand how modern money works. Even Ben Bernake appears to be clueless;
    certainly, Ron Paul and the ‘gold bugs’ as a group are promoting mis-umderstanding in order to enrich themselves and their precious metal hoards. The libertarians are generally ‘know nothings’ or ‘know very little’. The majority of Americans (not to mention many other groups world-wide) simply do not know the the modern money system could work for everyone’s benefit if it were not for the majority of decision makers actions based on selfish motivation. The main weakness of understanding modern money is that, once you do, you realize that most
    members of the human race may be incapable of expediting execution of first principles. In other words, where is that HONEST PERSON? Could an HONEST PERSON ever be elected, and if he
    were, would he be trusted to run the government? How would you know as it has never been done?

    When I initially came across the Volatility blog, I found it interesting as the author is a good word-smith and even writes poetry. Unless I see some corrections in the modern money explanations, I will have be more cautious if I am to believe stuff with which I am less familiar (admittedly, I am a bit lazy). There are a number of blogers who are trying to put out worthwhile ideas; ranting such as today’s blog tends to waste the unenlightened reader’s time. As an aside, I have been posting information about a site which promotes the presentation of ideas using animation, but have not actually taken the initiative as I have a limited background. As my daughter pointed out, animation/cartoons can occasionally be used to teach new concepts to the average person more effectively that writing.

    By way of clarification, a sovereign government such as the USA, UK, Denmark, Norway, Japan, and others which issue their own currency, make all purchases in their own currency (use floating rate exchange, etc.) have no theoretical limits to the amount of currency they are allowed to create; however, that does not mean that such a government should do so (many, who are unable to read/reason appear to not understand this statement; some misunderstand it to
    think that MMT advocates indiscriminate or inflationary money printing). This feature of modern money is apparently not understood by the Obama administration or prior administrations
    or by many so-called economists and financial experts (including Russ). Likewise, most Americans are unaware of many economics decisions which have allowed the evolution of government decision-making to screw-up the system.
    For example, many of the so-called experts bemoan the fact that the USA government changed the nature of the currency under Richard Nixon’s administration to abolish the ‘gold standard’.

    However, even when the USA government was on the gold standard in the mid -1940s at around the time of the Bretton Woods accords, an economist (whose name escapes me now) pointed out that some quaint principle that was important prior to Roosevelt’s actions [re-pricing gold so that it could be equivalently exchangeable with paper dollars] was no longer necessary. Since 1971, many of the economics experts who assist the various administrations still promoted decision making based on the assumption of gold-backing of the dollar; one upshot is that many politicians talk about a ‘lack of funds’ to do things that need to be done. This is frequently the language of those politicians who wish to convince a constituency that he fears the government might go ‘broke’ if his proposal/position is ignored. The USA government issues bonds and sets interest rates- both activities which are not actually necessary; but which
    benefit the very wealthy who possess inherited wealth and are able to earn money at the expense of the tax payer for doing NOTHING! The political obsessions in the MSM regarding political ideas are all nonsense, but are perpetuated to enrich the elite of our society.

    Obsessive political trash talk about the deficit, medicare and social security costs are all nonsense, but the public does not understand this; one of the reasons they accept the false arguments of politicians is they don’t understand how modern money operates. Even the well intentioned arguments offered by Ellen Brown’s articles (Web of Debt book and several blogs) or the American Monetary Institute are misguided because the ideas are based on archaic/incorrect or partially incorrect concepts (A point made by Michael Hudson at the recent AMI meeting in Chicago several months ago). Many people incorrectly think of
    fractional banking as related to the way banks actually ‘create’ money.
    By the way, I found Ellen Brown’s Public Banking site was/is very informative as she seems to be a good writer and, with her legal training, is able to understand aspects of the banking crisis which are insightful and important. The individual states in the USA as well as the individual nation states in the European Union (EU) are not sovereign and are unable to issue
    their own money because they voluntarily surrendered that right. In the USA, there is purchasing power
    (currency/money) generated after Congressional approval by interactions involving the Federal Reserve and the Department of Treasury; in the EU, the Central Bank (ECB) handles generation
    of money (details of which you will have to learn about elsewhere). Thus, all money used by the states in the USA or by the nation states in the EU has to be obtained from central sources and or by taxes. In the horizontal’ (modern money term) banking system , banks can
    lend money, however, that money is eventually recovered so that, in a sense, this tends to be a zero-sum game. The banks in a state may reserve the use of borrowed money (however, the
    state must stipulate how that money is allowed to be generated) for the use of state residents. Ellen argues that the individual states could demand that such monies as that in pension funds, as well as from state and/or private deposits, could be used to fund state banks which would then be able to re-lend to state residents. This is an interesting sort of proposal, however, it has not actually caught on in any other state that I have heard about. The situation in the EU is so complicated that I do not yet fully understand it; however, there is no less fraud in the EU than in the USA and the rules of the game are different.

    As L Randall Wray and/or Wm K Black recently noted:


    nothing can actually be done to correct the current economic mess unless and until the fraud is recognized as such and the crooks are put in jail.

    Another point for today- Marshall Auerback, in the following blog piece:


    explains that the process of further deficit creation is of no real concern in the USA unless that deficit results in inflation. That argument is theoretically correct, however, it does
    not mean that the government should just print money and hand it out as if it were a present from Uncle Sam. There are many considerations which have to be taken into account when the government creates money. Without attempting to elucidate them, consider that there is what the chartalists call a concept of double entry bookkeeping which comes into play; i.e., when the government spends, some of the spent funds are used to purchase goods and/or services; a portion of the funds spent comes back as taxes while another part is saved by the private sector which also invests the remainder in items which theoretically should benefit
    the government if that government was run for the benefit of its citizens. I have yet to encounter writings by any of the authors mentioned in this comment which implies approval of
    the actions of the past several administrations; to the contrary their focus is largely on attempting to teach that if one understood how the money system should work and could see that
    happen, the politicians might get on with important matters (in the interim, there will have to be many changes at many levels.

    An almost final point, check the comments at the following article:


    The MMT promoters offer comments which address some of those mentioned by the author, but point out that the “cat food’ commission recommendations are generally inadequate. The parts played by the do-little or nothing Obama administration and by various other politicians present overwhelming impediments to getting anything useful done in the next few years. Pity
    us all for having assisted such an inept bunch of opportunists; sort of like GW Bush all over and even more.

    And, finally, check L R Wray’s blog re Bernake’s latest blunder:


    Read the comments_ especially those by Tom Hickey (an engineer) who, in my opinion, seems to offer particularly relevant comments and analyses.

    While this comment is a bit lengthy, it really is important to know that much of economics as practiced widely (especially in U Chicago-influenced institutions) is responsible for a certain portion of the mess we find ourselves in today; the rest might be attributable to Alan Greenspan (the Ayn Rand disciple, the elite crooks who run the bailed-out, ‘too big to fail’ banks, the elected Congressional and Executive branch members, etc. There is lots of blame to go around and lots of crooks who should be in jail or worse.

    Comment by William Wilson — November 20, 2010 @ 8:23 pm

    • William, I’m sorry your comment ended up in my spam filter. I suppose it’s on account of all the links. (Though usually that goes into moderation.)

      I admit I can’t tell who you’re addressing with comments like this. It doesn’t appear to be directly at me or at people reading at this blog, but pasted from somewhere else. But that doesn’t matter.

      Unfortunately, you forgot to tell me what I got wrong, and in particular how I did a “hatchet job”. I thought

      1. I got it right;

      2. was operating in its spirit even if I got something wrong.

      So if you’d clarify, I’d appreciate it.

      I can’t wait to see how you react to part 2, which I intended to be my “criticism” part, among other things.

      Is your objection that I didn’t sufficiently emphasize that the deficit spending is beneficient under conditions of capacity underutilization? It seems to be. But I addressed that here:

      2. There’s no natural limit on rational, effective A1 deficit spending so long as there’s capacity underutilization and unemployment.

      It’s true that I don’t keep issuing caveats about inflation in sentence after sentence, both because I’m not defensive by temperament, and because I think it’s bad tactics to let the enemy’s frame dictate the way ideas are presented. But I thought I sufficiently included it. Do you disagree?

      Incidentally, a significant part of this is expanded from a Naked Capitalism comment that Fulwiller said he liked. So he didn’t consider me to be doing a “hatchet job”.



      Comment by Russ — November 21, 2010 @ 6:41 am

  5. […] In part 1 I discussed some of the core lies of neoliberalism: That money creation is based on deposits; that […]

    Pingback by Guns, Butter, and Bonuses (MMT, Money, and Deficits) Part 2 « Volatility — November 23, 2010 @ 4:20 am

  6. […] of some negation, what I’m not really advocating.   As I wrote in my MMT posts (parts one and two), I do want the knowledge to spread, that in principle deficit spending is unconstrained […]

    Pingback by Let’s Take Back Our Money « Volatility — February 9, 2011 @ 5:48 am

  7. I don’t think William should be allowed to hijack the blog with book-length comments. It ruins the spirit and the intellectual quality of a blog, which is to display comments that are focused on the blogger’s post–comments that add to specific post’s value. A blog is supposed to be an intelligent conversation. William, of course, is free to start his own blog.

    Comment by Jim — February 21, 2011 @ 6:02 pm

  8. Greetings.
    Hi Tinmuning, thank you for your useful answers and suggestions. I’ll better ask around in the forums.!..generic mail order!!!!
    generica pill

    Comment by jotiravam — June 4, 2012 @ 8:18 pm

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

%d bloggers like this: