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WARREN MOSLER considers the following as important:
This could be interesting, too:
Mike Norman writes Trade deficit
Mike Norman writes Bond market now pricing in one 25 bps rate cut by Fed in 2025
New Economics Foundation writes What are we getting wrong about tax
Sandwichman writes The more this contradiction develops…
I don't get #2. It is probably a matter of semantics but on page 8, paragraph 4 of the textbook, income remaining after tax is called disposable income. No mention of savings or 'transfers', which were mentioned in the multiple choice questions for Chapter One or or of public debt as mentioned here. Also at another point in the text p13 defining fiscal balance: "A govt fiscal deficit occurs when its spending exceeds its taxation revenue…', it talks about tax being revenue. To me revenue is income. But tax does not fund govt so how can it be income to govt? Tax is a destruction of money as shown in the video. When paid back it equals to zero. Drives me nuts when I can't talk to someone about this. The textbook authors give no contact for feedback.
I'm down under here in NZ and the only one (so far) in my small town excited about MMT. I just put together a presentation for my small group before I had the textbook, but have no way to check it's correct, especially as related to NZ, and that is what people here want, how does MMT apply to NZ? It did make an impact as one of the group is a Green Party member and part of the government coalition; she was exited about the JG and took it off to a meeting where they were discussing the UBI. Do you have contacts in NZ, Warren?
Hi Nancy
The GIMMS group in the UK might be able to help with your questions. They have an advisory board made up of leading MMT economists, including Warren Mosler.
gimms.org.uk
I hope they can help
Maybe the government might be a currency user, not federal. In America state, county, and city governments are currency user so the tax they collect is reused. The federal government however is the currency issuer and it can spend without taxes.
No, no, no. Don't mix destruction of paper with Gov does not need your dollars. The shredding of notes is not related to paying taxes or receive a deposit from the Gov, two separate and completely different things.
F. Bernardo Muñoz Armenta # It's a practical illustration that the government doesn't need dollars (it shreds them routinely)
@V J You are wrong. – You have the wrong facts. Shredding is done when notes are to worn to be sent back into circulation. Every shredded note is replaced by a new note and it adds up to a neutral balance.
You cannot say that it is an illustration that the government does not need money. Notes are only about 2% or less of that money in circulation and that percentage is getting less due to credit and debit cards.
The facts are here :- :- https://www.usa.gov/budget and the history of federal funding and spending is here :- https://www.whitehouse.gov/omb/historical-tables/ and table 1.1 shows what was spent over the last 200 years and what was used to pay for that spending.
If you want to argue with those historical facts by taking what MMT says as real you are in denial and will never understand what happens.
Bravo @Rob, excellent and simple explanation on note shredding.
@F. Bernardo Muñoz Armenta You are welcome. The MMT idea of government not needing the money that is already is the system is of course totally wrong.
It's as wrong as their disproportionate claims that hyperinflation in Zimbabwe was caused by loss of production when the government created massively more money to pay it's bills.
There was loss of production but is was very little in comparison to the increase in he money spent by the government. They created first million then billion dollar notes and then trillion dollar notes to replace the billion dollar notes.
Production did fall some years initially by 10% and then by 20% then some more at the same time they were creating billion and trillion dollar notes so government could buy up everything and wipe out the value of people's savings that people formerly had including the country's retirement funds which became worthless because of the drop in value of their currency of 5 thousand billion percent.
The odd thing is they are starting to do it again with the Zimdollar. I wonder what Mosler and Mitchell will have as a reason this time.
You say clearly the government does not need your dollars to spend.
The explanation is too simplistic to be true.
The government according to you Mosler does that taxing to "provision itself". – Your own words not mine.
How does government provision itself if it does not spend taxes ?? Impossible !!
It is MMT double talk !!
The government is he currency creator/issuer. ALL money is from Congressional appropriations allowed by law in the Constitution. WE can't even have money to pay taxes to the IRS, until, the government issues it. Logic is your friend..rethink your assertion.
@Kathleen Bassett No ! – You are ignorant of the facts and that includes ignoring fractional reserve banking.
Start thinking instead of swallowing whole what some MMTer has told you.
You are only aware of a simplistic and very restricted view of what happens with money creation in a fiat money situation with fractional reserve banking. You need to inform yourself of how the money system works with fractional reserve banking.
It works by banks creating money digitally when they give loans. They lend many times more than they have on deposit. That is because they can create money since they have a license to do it. Start thinking instead of swallowing whole what some MMTer has told you and follow the money trail.
oking at the
@rob they dont need the money they need the labor and resources you twit. They issue the tax liability to make people need the currency, then issue the money, and finally collect it. The reserves requirements in fractal reserve banking for a bank come from the government or the governments bank. Bills from the treasury or other government backed securities. In order for a bank to have the necessary reserve requirements they have to be spent or created into existence first. In the case of government back securities its typically created from money in the economy already, in the case of bonds and such. Treasury physically creates cash deposits. So the treasure deposits $100 the bank then has the ability to loan out $1000. I'm not sure if you actually understand fractal reserve but that's the quick and dirty. The source of the money has to come from somewhere and it's the treasury or fed. When the treasury spends it's not recorded in the deficit only when the fed has to make the payments. thats how Obama "saved" a bunch failed banks. The treasury bought up a bunch of dead assets giving the reserve requirements to the banks and taking bad assets off their books giving the private banks the ability to pump out more loans.
The speaker in this video uses an argument based on a fallacy when explaining how new money is created and used by government to fund their spending. He quotes former Federal Reserve chairman Ben Bernanke as saying " It is not tax money, the banks have an account at the Fed much the same as you have an account at the bank".
The problem with the MMT argument is that the Fed does not create money for government spending since they create that new money to Buy bonds from the Government Treasury . Treasury provides that money that paid for the bonds along with tax collections and their own bond sales to fund the government's budget.
It is bonds that top up the government's budget to replace the tax shortfall that comprises most of government spending that the government uses to provision itself.
The historical factual evidence is on the following site :- https://www.whitehouse.gov/omb/historical-tables/ nan contained in table 1.1 which has 200 or more years of historical evidence of what taxes have been collected and what has been spent. So that claim of the Treasury not getting anything from the taxpayer's tax payement is pure B.S.
If taxes did not fund governemnt spending the whole idea ofa surplus would never exist since governemnt spending would always exceed the money that it did not receive. It would be permanent budget deficits whe the fact is there have been surpluses at times.
The additional fact is the net sum of deficits is the national debt. It was approximately 10 trillion ten years ago. It has risen by only about 11 trillion in ten years despite the government spending well over 30 trillion in that period. Anyone with a basic understanding of mathematics can see that without taxes funding government spending the sum of spending would have been over 40 trillion. The mathematics – 10 trillion ten years ago plus 30 trillion spending since equals 40 trillion. The MMT explanation is therefore garbage.
The statement that "that is where all dollars come from" wrongly assumes all dollars are created this way by the government. They are Not since banks create more dollars by lending to borrowers and that only requires a small proportion of the amount of money lent to be retained as a reserve which the Federal reserve bank mandates. Its a fractional reserve system not a full reserve system.
Bank loans create debt to be repaid…Congressional spending creates no debt. ONLY Congress through appropriations, can create new currency.
@Kathleen Bassett How can you be so wrong? You need to research properly the way money is created and take notice that congressional spending creates debt when it is money borrowed via bond sales to fund deficits. That is debt which matures and has to be paid out on maturity on a continuing basis. That process happens daily when the older bonds mature.
The evidence is on display on the official websites. Look at them and don't just focus on what MMters have misinformed you about. Their claims do not stand up to scrutiny and the reality of the situation.
The only congressional spending that does Not create debt is their spending of taxes that have been collected so the government can provision itself. Even Molser says taxes are for government to provision itself. How would that be so it taxes were not spent again?
@Rob – You misunderstand the term "provision" and either haven't read, or understood its meaning here. Watch the video – then ask/comment about a specific slide – that will make it easier to discuss this.
@James Keziah Delaney It is Not me who does not understand. It is You who have been taken for a ride by the lies and deception of this video..
! Firstly :-
The statement by Bernanke is in response to the creation of now fiat money that is created. Not money collected from taxes. He even describes that by likening it to what private banks do when they make a loan to a person or business.
Secondly :- You have also not understood what the expression 'running out of money' is when described by a politician or even a president. It means there is no more money the Treasury has which is the institution that funds government spending according to what congress authorizes. Treasury does Not create it's own money. Only the Fed does and private banks do when they lend. That is why the reply was "we are operating in deep deficit".
Thirdly :- The speaker himself says "when you pay your taxes with a check … your bank changes the numbers in your bank account". Yes, because that creates a
loss of money for you and an increase for government because the money is Not Destroyed. It is recorded as either an increase of money (in the government account) or decrease of money (in your account). – No money is destroyed or created in that process. It's a process similar to you paying someone else for a bill you got.
The statement that "the government doesn't get anything" is just plain stupid and Deception of the Worst kind .
Since when is a credit in the government's account "nothing" when it represents payment of a bill that was owing.
The fact is the government gets a credit in their account equivalent to the decrease in your account of the tax you have paid !! That credit is sent to Treasury and forms part of the funding for government spending. Government has No other source of funding than what is in the Treasury as a credit and that is what is used to assess whether the budget is in surplus or deficit. Most of that revenue is from taxes and some is from money collected from borrowing by selling bonds. There is over 200 years of undeniable historical records that show this is true.
The creator of and the speaker on this video rely on ignorance of inexperienced and trusting viewers to put across misleading information to convince you that MMT is factual when it is heavily factually incorrect.
Imposing a tax does not automatically create unemployment as the author claims. It merely pushes up prices since people have to pay government as well as that they otherwise could have paid for goods or services.
There is No explanation from MMT as to the mechanism of how or why taxes create unemployment because they have none. The explanation is faulty and based on a fallacy. If taxes automatically created unemployment then a complete absence of them automatically would create more employment which is not the case.
Here's an explanation…All currency originates with Congressional appropriations….you are required to pay tax to the government……you must work for that currency (it's the only currency that is equal to one tax credit per unit)…you MUST work or steal (not recommended) to satisfy that tax imposed on you…or lose your stuff. SO, if we're required to satisfy our tax obligation to the government, in their money, it is up to them to employ us to make the money…Thus, the Federal Job Guarantee is promoted by MMT literate people.
@Kathleen Bassett You have a very narrow minded outlook on how money is created and by whom. In the US it is created by the Federal Reserve not Congress.
No, all currency is Not 'the government's' as you say. The Congressional appropriations are approvals for it to be spent not created. You do not have to work for that currency the Congress has approved. You may work for money created by banks as do people who work for someone who has gotten a loan.
You may well buy the currency (the money) from a bank by paying with another country's money.
You may well be on welfare and not work.
You may be in a situation where you don't have to pay any income tax at all so don't have to work for it.
Your argument "SO, if we're required to satisfy our tax obligation to the government, in their money, it is up to them to employ us to make the money" . That is plainly wrong. If you owe someone a debt they are not obliged to employ you !! It is not their money.
There are countries without any taxes. – Is their currency owned by the government ? No.
The countries without taxes also have those sovereign currencies. How does that reconcile with your MMT claims of taxes driving the currency since a tax obligation does not exist.
You need to do your research – properly.
Get a life, Rob.
Is this the limit of your intelligence. It seems so. Just ad hominem abuse. All displayed for others to see. Congratulations.
A message for Warren, Please get with the other core MMTers and find some way to set an upper limit on deficit spending. I suggest you start with the amount of deficit spending of any year should be about = the trade deficit + total saving by people and comp. + 1% of GDP. [with an escape clause that is used in emergencies] I'm sure you-all know more than me and can improve that, I just think that the lack on a limit makes it harder to convince people who know enough history to know that limitless spending can create a lot of inflation. And people don't trust Congress the act wisely.