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View Diary: Insolvency, tax cuts, military spending and social security (188 comments)

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  •  Ah, the conspiracy theory (0+ / 0-)

    explanation of cutbacks. Sorry, don't buy it. You, I take it, accept it as an article of faith.

    In re: your monetary theory—
    You confuse a bunch of things with similar names but different meanings, and not all debt is identical.
    If all the gov't need do is print money, then we're in great shape. Unfortunately, if there are a million dollars in circulation and the government injects another million into the system, in short order the amount of widgets purchasable with that million will be cut more or less in half.

    Governments have unlimited supplies of paper and ink, but they never, ever, have "an infinite amount of money." Frankly, I'm shocked that any adult could believe such a thing.

    As for FDR, you ought to go back a reread his speech, and think about the part where he notes that, "Nevertheless, gold, and to a partial extent silver, are perfectly good bases for currency and that is why I decided not to let any of the gold now in the country go out of it."
    A canny guy.

    •  You are assuming (1+ / 0-)
      Recommended by:

      that the economy is already producing as many widgets as possible. That is not the case. We have about 8% unemployment in this country, and those 8% could be put to work making (alot) more widgets.

      The government never "has" or "doesn't have" any money. To borrow an analogy from a book by Warren Mosler, the government is like a football stadium. No one ever asks whether the stadium has enough points available to it to put up on the scoreboard. When there's a touchdown, someone in the press box just pushes a button and voila! there are more points.

      What is your point regarding gold and silver?

      •  FDR's point (1+ / 0-)
        Recommended by:

        not mine. And his point was that even a fiat currency eventually rests on some estimate of tangible worth—in his time, gold and silver.

        You imagine that governments simply wish money into existence and that's that. To stick with your analogy, you imagine that the stadium owner can just keep putting up points at will and ad infinitum. goals scored or not. But in fact, the owner is limited to adding in only the points the team is able to score. The team scoring is the source of value for the points, which must represent some source of value.

        If your version were real, what reason is there that the government doesn't simply print up $15 trillion tomorrow and wipe out the national debt? If you think there are no constraints, you are living in a fantasy world. If you understand what the constraints actually are, you are one the path to beginning to understand why even a fiat currency must represent some sort of limited-supply value. This is econ, 101.

        •  Here's some econ 101 :-) (0+ / 0-)

          what reason is there that the government doesn't simply print up $15 trillion tomorrow and wipe out the national debt?

          Doing this would not wipe out the national debt. It would merely transform it from bonds to dollars. It would be like replacing all the hundreds with two fifties. Big deal.

          You don't understand FDR's basic MMT/Keynesian/Institutionalist/Chartalist point.  Government debt is government currency & vice versa.

          Of course there are constraints. But not abstract financial constraints. "Governments simply wish money into existence and that's that" is absolutely correct.

          The problem is that Econ 101 basically has taught pure shit to undergraduates for the last 30 odd years. I studied a bit of econ in the late 70s, stopped because there was too much nonsense in it. Looked at recent textbooks, and saw that the shit had completely taken over. A lot of the work of the MMTers is simply cleaning away this shit.

          Gold & silver never really backed currencies. Intrinsically valuable fiat currencies backed these rather worthless commodities, driving them up to ludicrous prices. FDR knew this, which is why he went off the gold standard, to all intents and purposes converting money back to what it always was, fiat money, credit. Gold is valuable because you can get dollars for it, not vice versa -something gold mine owners know very well.

          The true backing was the tax system & government spending, creating a monetary economy, where commodities were traded for credit = money. The responsibility of the government is that its credit=money does not inflate with respect to consumer goods.

          It is tragic that adults have been brainwashed into the preposterous, psychotic belief that governments do not have an infinite nominal spending capacity - what I meant by an infinite amount of money, what Mosler & pivy mean by neither have nor not have.

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