Modern Monetary Theory (MMT): How Fiat Money Works

[g5000]

Fiat money has nothing physical to back it up. We're not on the gold standard.

Thank God.

So how about you explain how a sovereign currency issuer borrows its own money?

Countries like China lend it to us. Did you not know this? Weird!

Also, the Federal Reserve monetizes the debt (prints money), but the part you deliberately fail to mention in every single topic you have started about money is that same money is destroyed when the Federal Reserve sells the bonds it used to monetize the debt.

They do?

Yes, they do. Your ignorance of this fact, which I have explained to you before, is evidence of how ignorant you are about the subject of monetary policy and goes a long way toward explaining why you fell for Mosler's crock of shit.

We run a trade deficit, which is a part of the reason we're the worlds reserve currency

That is a complete fiction!

 

[Dovahkiin]

Fiat money has nothing physical to back it up. We're not on the gold standard.

Thank God.

So how about you explain how a sovereign currency issuer borrows its own money?

Countries like China lend it to us. Did you not know this? Weird!

Also, the Federal Reserve monetizes the debt (prints money), but the part you deliberately fail to mention in every single topic you have started about money is that same money is destroyed when the Federal Reserve sells the bonds it used to monetize the debt.

They do?

Yes, they do. Your ignorance of this fact, which I have explained to you before, is evidence of how ignorant you are about the subject of monetary policy and goes a long way toward explaining why you fell for Mosler's crock of shit.

We run a trade deficit, which is a part of the reason we're the worlds reserve currency

That is a complete fiction!

Monetary policy is a drop in the bucket compared to the effectiveness of fiscal policy.
Please explain how the dollar would be the worlds reserve currency if we weren't running a trade deficit. I'll wait.

 

[SwimExpert]

During an economic downturn, we might see C and I decline, and so to keep GDP in balance (avoid a recession), we need to increase G. This formula is the basis for stimulus spending.

False. That formula is the basis for smart stimulus spending. In practice, honey badger don't care.

 

[g5000]

Thank God.

So how about you explain how a sovereign currency issuer borrows its own money?

Countries like China lend it to us. Did you not know this? Weird!

Also, the Federal Reserve monetizes the debt (prints money), but the part you deliberately fail to mention in every single topic you have started about money is that same money is destroyed when the Federal Reserve sells the bonds it used to monetize the debt.

They do?

Yes, they do. Your ignorance of this fact, which I have explained to you before, is evidence of how ignorant you are about the subject of monetary policy and goes a long way toward explaining why you fell for Mosler's crock of shit.

We run a trade deficit, which is a part of the reason we're the worlds reserve currency

That is a complete fiction!

Monetary policy is a drop in the bucket compared to the effectiveness of fiscal policy.
Please explain how the dollar would be the worlds reserve currency if we weren't running a trade deficit. I'll wait.

That's not how it works, dipshit. You made a claim. Back it up.

I can't believe how ignorant you are.

We had a massive trade surplus when we were established as the world's reserve currency.

 

[CrusaderFrank]

So how about you explain how a sovereign currency issuer borrows its own money?

Countries like China lend it to us. Did you not know this? Weird!

Also, the Federal Reserve monetizes the debt (prints money), but the part you deliberately fail to mention in every single topic you have started about money is that same money is destroyed when the Federal Reserve sells the bonds it used to monetize the debt.

They do?

Yes, they do. Your ignorance of this fact, which I have explained to you before, is evidence of how ignorant you are about the subject of monetary policy and goes a long way toward explaining why you fell for Mosler's crock of shit.

We run a trade deficit, which is a part of the reason we're the worlds reserve currency

That is a complete fiction!

Monetary policy is a drop in the bucket compared to the effectiveness of fiscal policy.
Please explain how the dollar would be the worlds reserve currency if we weren't running a trade deficit. I'll wait.

That's not how it works, dipshit. You made a claim. Back it up.

I can't believe how ignorant you are.

We had a massive trade surplus when we were established as the world's reserve currency.

QFT

Now we export our dollars and jobs and somehow that's a good thing

 

[Norman]

How about the fact that a majority of our wealth has flowed to the infamous 1%... Should the government be motivated to stimulate the private sector and top earners to spend more, saving less and putting more money into circulation or do you see it as a simple matter of government deficit spending?

It's a huge problem. Spending drives the economy, and saving is a drag on consumption, harming the economy. The government should do its best to get dollars into the hands of the poor and middle class, and do all it can to encourage spending.

Savings harms the economy? All growth is the result of savings. Only someone trying to justify a huge wasteful rapacious government would claim savings is harmful.

I agree with Dovahkiin on this one... Our economy thrives on the transfer of funds from one hand to another. If people stopped borrowing and spending and simply saved then our GDP would tank and our economy would slow and the debt would increase. Think about it, the "debt" that conservatives are so worried about is mostly comprised of domestic investment in treasury bonds. If the people tighten up and save more than spend then they keep their money in savings and investment accounts adding to the debt and decreasing GDP.

bripat9643, that noodle behind your eyes seems to be firing alright but you seem to jump to an opposition reaction to everything. Even when you agree you are doing so in an oppositional way. Most of us welcome a healthy debate but it is also OK to agree and consider alternative ideas... its how we grow.

Back to the topic... I think we can agree that the country thrives when money changes hands. Unfortunately a very large percentage of that money flows to the top, so what is the best approach to even the scales? Higher taxes for the rich or Lower taxes via tax incentives to stimulate spending?

Economies don't thrive on theft, but production. Just to be clear here, you are talking about theft when you say "money changing hands". Now, economics tank every time there are major changes, hardly a good argument.

If you bothered doing any research, you would fine countries with more considerable savings rates do just fine - and generally speaking better. Who knew that if future consumption is preferred over current consumption (saving), the future is going to be prosperous? Wow... what a leap of logic. Economies don't grow on spending but saving. Spending is nice for short run aid at best, to bolster failed businesses.

Doubtful that paying more taxes incentivizes anyone to work. Penalize something and you get less of it. This applies to success.

Garbage ideas can be of course considered and then thrown to the garbage can where they belong. So far you were not even successful at formulating a proper argument. To be frank your argument sounded more than anything like "I like spending" "Therefore it's great! And rich better pay for it, cause I hate actually producing anything!".

Name the countries you're talking about, and keep in mind that when one sector saves, another has to be in deficit. This is true anywhere you look.

If I build a house, who exactly has to have a deficit? Tell me now!

You are completely clueless on what savings even are because you are associating NET SAVING with saving. No wonder you are so confused. This is why MMT is especially bad theory - it is confusing and people do not understand the underlying concepts. It's a terrible theory, with absolutely opposite of reality interpretations by people who don't even understand what it says.

Just go to IMF database and look up the savings rate by country, countries with higher savings rate have higher GDP growth on average and especially higher incomes as generally they have a trade surplus (IE income generating foreign investments). Generally countries with higher government spending have less GDP growth.


Finally, net savings are indeed only possible if there is a deficit by one sector. However, in the case when that other sector is government they can be only realized by technical gimmick, which is that the future tax increases and inflation are not considered liabilities of the private sector. MMT is operating on false dichotomy, where government and private sector are different economies, they are not, in reality. If the government spends, private sector has to pay...

 

[Norman]

During an economic downturn, we might see C and I decline, and so to keep GDP in balance (avoid a recession), we need to increase G. This formula is the basis for stimulus spending.

False. That formula is the basis for smart stimulus spending. In practice, honey badger don't care.

The formula is not a basis FOR ANY economic policy. It's a descriptive formula. Embarrassing how many people get this wrong. Also, government transfer payments are not considered government spending in that formula... the formula counts only PRODUCTION, shuffling money from one part of the economy to the other, does not increase G. G increases if government builds a road, by the value of that road (usually valued at the cost of the inputs).

So what does the government actually PRODUCE (the G in the equation, so no transfer payments but actual production). Seems like that would be mostly the army and wars. So a lefty is arguing for wars and conquering as means to higher GDP. You couldn't make this up.