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Government’s Infinite Money Trick?

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Government's Infinite Money Glitch?

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Steve Keen considers the following as important:

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Government's Infinite Money Glitch?
Steve Keen
Steve Keen (born 28 March 1953) is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay.

8 comments

  1. @GhostOnTheHalfShell

    dumb question: where does the money to purchase bonds come from and what happens if no one buys them?

    Bonds purchased from deposits simply recycles existing money with the promise to pay some interest.

    An explanation would be nice because the argument here is incomplete.

    • No such thing as a dumb question ⁉️

    • Here is a question for you? Are you asking about a currency which is abandoned or the start of a currency?

    • @GhostOnTheHalfShell

      @@friendofvinnie simply the logic of the argument as presented: gov issues bonds, which “finance” debt. Bonds seem to be purchased from existing deposits or it is implicit. Does this mean money is destroyed or simply shifted, and if debt is expanding from where have these digital spondulets come from?

      money is a term so overloaded in meaning and at this point in history badly defined, I wish it were deleted from most argument. I retain a fairly strict definition as bank notes in my head, because everything else exists in digital ledgers and these constructs have zero relation to physical paper.

    • @GhostOnTheHalfShell

      @@friendofvinnie =D indeed. The problem with economics is I read a page of even sensible stuff like Graziani and two pages cause me to write 5 pages snarling at how much hand waving presumption fills description of various theory. Ecologists would never presume a model of an aphid’s life cycle began at egg or mating stage and different product models of life cycle based on those starting points would be laughed out of existence if they did. Not so in economics. Derivation is a joke.

    • From the central bank. The government has its bank account at the central bank, which means, that the bonds must be paid with money from the central bank.

      The bonds are sold to banks, who buy it in an auction and who do have an account at the central bank too. They borrow the money from the central bank, which is where the money is created.

      Since the banks don't need to worry about the ability of the government to buy back the bonds, the reason for buying those bonds is just the difference of the interest they pay and the interest, they get.

      The interest of the bond is not the interest which is a part of the bond. The bond is a combined promise:
      1. the amount of money, which the government will pay when buying back the bond
      2. the annual interest
      3. the term of the bond

      All three together result into how much money a bank will get. In the auction the banks offer money for the bond. The difference between those two numbers is the interest the bank will get.

      So there is no reason for not buying the bonds.

      When the government spends, the money returns to those banks. Since the receivers are customers of the banks, they create money in the accounts of those customers.

  2. It's so simple that people don't believe it !

  3. He’s describing the process of depreciating a currency against itself. PSA: however, it is possible, using the credit theory of money, to create a currency that appreciates against itself.

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