Bill Mitchell – Billy Blog

I would like to clarify that the MMT proponents that I follow are not favorable to the QE type of interventions that we have seen in the last years. They only pointed(1), correctly, that QE was not going to be inflationary AND that monetary policy is not the proper tool for this kind of problem. Fiscal policy is the proper tool. You will not find MMT economist defending QE or the buying of financial assets, other that public debt bonds, if it's legally required to finance fiscal policies. If fact, many are very critical(2) of this kind of programs. (1) - http://bilbo.economicoutlook.net/blog/?p=28422 (2) - http://bilbo.economicoutlook.net/blog/?p=4763

That's now how any of this works. That's certainly not how inflation works. At some point, particularly given the last 40 years of evidence to the contrary, people need to simply accept that monetary expansion does not "cause" inflation [1]. Inflation is not a monetary phenomenon at all. Inflation is a price level [2] phenomenon largely driven by trade imbalances. Inflation is about market power, or what some call pricing power. The common case here, btw, is when your external partners from whom you need to import critical goods get even a little bit pricing power then you will get inflation. China is seeking to own all its externals and deliberately suppress any such pricing power not driven by its own banks. [1] https://www.bloomberg.com/news/articles/2018-03-22/the-great-inflation… [2] http://bilbo.economicoutlook.net/blog/?p=10554

I haven't checked the video (can't watch it here), but there are indeed many misconceptions about how the banking system operates. In particular, banks do not lend out deposits, at least not in any meaningful way, and the so-called money multiplier is non-existent. To get up to speed on such things, I would recommend the blogs of economics professor Bill Mitchell. His style is a bit rambling without much polish, since he writes one entry every day, but I found it very worthwhile for getting a deeper understanding. Consider looking for entries with "money multiplier" in the title in the index here: http://bilbo.economicoutlook.net/blog/?page_id=1667

I do not think the US is unique, indeed I would say that all modern western countries suffer the same problem. The elites were closet supporters of fascism until they weren't. Then we had this anomalous period from the end of WW2 until the early 1970s when the Keyensians were dominant and governments pursued full employment economies via fiscal policy. The elites really can't abide sharing with labour, and capitalised on the early 1970s inflation/oil shock to promote their essentially neo-feudalist policies in the guise of neoliberalism/monetarism. The narrative of how all this came to pass is largely forgotten by mainstream economics, but there is an excellent series of posts, if dense at Bill Mitchell's blog[1] that cover this, and is much better than my crude paraphrasing. The logical end-point for rentiers is feudalism. Without communism as a viable alternate force, I think they are seeing how low that floor can go. [1] http://bilbo.economicoutlook.net/blog/?p=32776 Part 10, 11 and 12 are particularly relevant

Modern Monetary Theory reveals the entire premise of this issue to be false. The private sector does not fund the public sector in the way that most people believe. Non-convertible floating FX currency regimes (ie fiat money) such as the US,UK, and Japan can meet any and all financial obligations by issuing currency. Thus: 1) Taxes do not fund government. ( they 'back' the currency) 2) Treasury securities do not fund government. ( they are a tool to control interest rates) 3) Social security is solvent and we are not creating a financial burden for our grandchildren. (we are creating a burden by not upgrading and investing in infrastructure such as roads,highways,mass transit,etc) 4) Medicare is solvent ( though we have to clean up the fraud) 5) Private sector savings do not fund investment. ( banks create loans out of thin air) The public is being lied to by politicians( on both sides of the aisle) who are selling a false need for government austerity when in fact what we need is the government to invest more. Much more. People stop believing the bullshit from mainstream media bought and paid for by the plutocrats. Spend a bit of time to educate yourself on Modern Monetary Theory. It will change your political outlook. Its an earth is round vs earth is flat type of revelation. You can Google the following list of founders and well known MMT advocates in academia and the blogosphere. Warren Mosler - www.moslereconomics.com Dr Randal Wray - UMKC…

https://www.newcastle.edu.au/profile/bill-mitchell "We have known about the concept and relevance of hysteresis since the 1980s. In terms of the academic work, I was one of the earliest contributors to the hysteresis literature in the world. I published several articles on the topic in the 1980s that came out of my PhD research as I was searching for solutions to the dominant view in the profession that the Phillips curve constraint prevented full employment from being sustained " http://bilbo.economicoutlook.net/blog/?m=20200629

They are simply numbers in a database. http://bilbo.economicoutlook.net/blog/?p=14620

One of the authors of the reviewed textbook has a three part response to this paper. >In this blog post, I provide a response to the specific points made in that paper and conclude that if it aims to be a fair ‘guide’ to MMT (even from a critical perspective) then it fails badly. >In fact, his readers will come away from reading his paper with a very weird version of our work. I hope they are curious and come back to source to learn how they have been mislead – intentionally or otherwise. >I hope that Greg Mankiw changes his “Skeptic’s guide” when he presents it in the coming days at a major conference in the US. >He has clearly misrepresented our work in significant ways and that should not be tolerated in an academic milieu. http://bilbo.economicoutlook.net/blog/?p=43900 http://bilbo.economicoutlook.net/blog/?p=43961 http://bilbo.economicoutlook.net/blog/?p=43997

An interesting though experiment would be to investigate what you expect to happen against what happened in Japan, which had basically flat inflation from 1992 to present: http://bilbo.economicoutlook.net/blog/wp-content/uploads/2012/06/Japan…

The idea that a government with control over its own currency can print money to pay debt without significant inflation is a part of Modern Monetary Theory. Here's a blog post explaining it: http://bilbo.economicoutlook.net/blog/?p=31715

It still shows what to think about the economic experts in banks, politics and schools like Harvard. http://bilbo.economicoutlook.net/blog/?p=40313 http://bilbo.economicoutlook.net/blog/?p=39889 http://bilbo.economicoutlook.net/blog/?p=39788

It sounds like China is pushing digital currency just like what the US did to buy it's own debt. http://bilbo.economicoutlook.net/blog/?p=25161

A universal basic income is inferior to a job guarantee: http://www.economonitor.com/lrwray/2013/07/09/how-big-is-big-enough-wo… http://neweconomicperspectives.org/2014/01/16-reasons-matt-yglesias-wr… https://www.reddit.com/r/BasicIncome/comments/3ne2iu/randall_wray_mmt_… http://bilbo.economicoutlook.net/blog/?p=13025

EconViz (http://www.econviz.org) uses visuals to describe the circular flow of income through modern monetary systems (meaning non-EURO countries). It's based off the work of MMT (modern monetary theory) scholars such as Warren Mosler (Recently profiled in NYTimes: http://nyti.ms/10DglvK) and Bill Mitchell (http://bilbo.economicoutlook.net/blog/).

"The first function of unemployment (which has always existed in open or disguised form) is that it maintains the authority of master over man. The master has normally been in a position to say: ‘If you do not want the job, there are plenty of others who do’. When the man can say: ‘If you do not want to employ me, there are plenty of others who will,’ the situation is radically altered.’" -- The Times, 1943 (via http://bilbo.economicoutlook.net/blog/?p=11941)

"The problem is that credit is not a fixed amount due to the fact that it is leveraged" can't be true. How could the amount of credit ever be fixed? Whether banks lend or not depends on whether they can make money lending. That'll never be a constant. Here's a pretty good post (and comments) on how FR relates to modern money: http://bilbo.economicoutlook.net/blog/?p=7299

Do you apply this standard to all beliefs you have? It’s interesting that you wrote what you did when you could have done a search and found some answers. From the third link below: Meanwhile, Americans’ international peers enjoy more efficient and reliable services, and their public investment in infrastructure is on average nearly double that of the United States.....The United States generally lags behind its peers in the developed world. According to the World Economic Forum’s Global Competitiveness Report, in 2016 the United States ranked [PDF] tenth in the world in a broad measure of infrastructure quality—down from fifth place in 2002. That places it behind countries like France, Germany, Japan, and Spain. http://bilbo.economicoutlook.net/blog/?p=37562 http://theconversation.com/measuring-up-us-infrastructure-against-othe… https://www.cfr.org/backgrounder/state-us-infrastructure

Yes, learning how banks create money for me was a huge turning point in realising most of what people think they know (and what I thought) about money, debt and economics is actually wrong. That the money supply grows when banks lend and contracts when people pay the debt down is a big point to get your head around. The other big one is the national accounts and sectoral balances - see [1] for a much more detailed run-down. To summarise, take the definition of GDP: (1) GDP ≡ C + I + G + (X – M) where C is household final consumption, I is private investment including inventory, G is Government spending, and (X-M) are net exports. Add net external income flows (FNI) to (1) and you get GNP: (2) GNP = C + I + G + (X – M) + FNI Subtract total transfers and taxes from each side: (3) GNP – T = C + I + G + (X – M) + FNI – T Collect terms by sector (private, Government and External) (4) (GNP – C – T) – I = (G – T) + (X – M + FNI) Then we can simplify - (GNP - consumption - taxes) is equilivalent to private saving (we’ll call that S), and (X - M - FNI) is called the Current Account Balance (CAD): (5) (S – I) – (G – T) – CAD = 0 or (6) (S – I) = (G – T) + CAD What this means is that by definition, if your external sector is balanced, a Government budget surplus must reduce the net assets of the private sector by exactly the same amount as it is in surplus. With a trade deficit and a Government surplus, the private sector’s net assets are reduced by the sum of…

> Does this mean fiat currencies have intrinsic value? If so, how is this value more 'intrinsic' than the value a network gives a cryptocurrency? Because you are required to pay taxes. > although Modern Monetary Theory would argue the two are effectively the same Actually, if I understand correctly, MMT would argue that a central bank has very little control over money supply(other than in the rare case of acting as a "lender of last resort"). Instead, money is created through the act of deficit spending. http://bilbo.economicoutlook.net/blog/?p=1623 A helpful illustriation by MMT'er Warren Mosler > The question is, “How do you turn litter into money?” > So, I take my business cards out here, and these are twenty dollars a piece, if anybody wants to buy any. No? Any takers? No? Okay. > All right, well if anybody wants to stay after and help clean up the carpet and tidy up the room, I’m going to pay one per hour. Or five per hour, or whatever, one per hour. Anybody want to stay and help? Okay, not a lot of takers. > Then I add one more thing: Look, there’s only one way out of here and there’s a man at the door with a nine millimeter machine gun. Okay? And you can’t get out of here without five of my cards. > Now things have changed. I’ve now turned litter into money. Now, you will buy these, you will work for these things if you want to get out. The man at the door is the tax man and that’s the function of taxes.

Well in a nutshell, the US government makes the money. It can never run out. So it isn't dependent on tax revenue to spend. So the limitations on spending are elsewhere. This is a good intro: http://elliswinningham.net/index.php/the-basics/us-currency-part-1/ http://elliswinningham.net/index.php/the-basics/us-currency-part-2/ http://elliswinningham.net/index.php/the-basics/us-currency-part-3/ Also maybe: http://bilbo.economicoutlook.net/blog/?p=9281 A rant on deficits: http://elliswinningham.net/index.php/2017/01/10/deficits-matter-paul-k… For more, just look up modern monetary theory.