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Money is an accounting system for events that happen in real life; it is not life itself. Money has no physical reality; it is an invention of mankind that serves as an accounting system to itemize, record and control things and events in the real world. But it has so pervaded our lives that it far exceeds its original function of facilitating the trading of commodities.

To a great many people money is God. It is a god that can be manipulated and augmented, giving the individual great godlike power in his imagination. The financier can create his own “funny money” and believe that he will some day have the world on a string. But because that day always remains in the future, the money-worshipper will never be satisfied, and he will continue his fortune buildup without regard for the welfare of the many around him who are devastated by his selfish actions.

And we find that, in spite of their monetary abundance, most money-worshippers are dissatisfied and insecure.

The respondents turn out to be a generally dissatisfied lot, whose money has contributed to deep anxieties involving love, work, and family. Indeed, they are frequently dissatisfied even with their sizable fortunes. Most of them still do not consider themselves financially secure…
Quoted in my diary:

People can become wealthy by making useful contributions to society—an invention, an important service, an outstanding artistic or literary work—and society will feel they deserve rich rewards. Others can become corporate CEOs and claw their way to obscene salaries through robbing or decimating underlings, employees, customers and the environment. Those in the world of finance reside at the bottom of this list through non-productive societal disruption and debasement. Some corporations, in spite of their drawbacks, produce goods actually useful to society, but the financial industry is both non-productive and often hurtful to society. Modern Monetary Theorist Warren Mosler had this to say about financiers:
I’ll be the first to say that the financial sector is, by and large, a total waste of human endeavor…

Co-blogger Nellenbracht commenting in another diary described succinctly what is happening in the U.S. due to the huge displacement of money toward the wealthy end of the spectrum:

…the top end of the economy is hoarding dollars.  The total reserves held by U.S. depository institutions has topped $1.5 trillion, where only five years ago that number was under $100 billion.  Those dollars aren't doing anything except blowing bubbles in markets.
The bottom end of the economy, on the other hand, is dumping dollars just as fast as they can get them in favor of unwinding their debt load (largely) and buying real goods and services so they can meet their human needs and wants.

The banksters are not doing productive things with their money, while those in the bottom and middle income categories are trying to survive and pay their debts as best they can, or falling into poverty and homelessness.

Homeless and forgotten in downtown San Francisco.  Photo by Sven Eberlein

Banks are not loaning much to individuals or businesses, so businesses are not hiring and people remain unemployed and the recession/depression continues and deepens.

And as Meteor Blades notes in a June 10 story (,

With so many workers [still out] of a job, there is no pressure on employers to offer even modest raises. And given the pace of job growth, 157,000 monthly for the first five months of 2011, full recovery is a long, long way off, which likely means wage job will remain depressed as well. For many workers, the current drop puts another layer of hurt on the stagnant growth in wages over the past three decades.

To return to my opening statements, money is an accounting system with no physical existence. For convenience it can be represented by physical stuff like metal coins—helpful for operating vending machines—but in essence it is a social contract. The government guarantees that the bearer can use it for any of its numerous customary uses, such as purchasing goods or services or paying taxes.

Money is a quantifying medium, so that bank balance numbers in a computer indicate degrees of wealth. The wealthy individual has large numbers, but they are actually potential wealth. His real wealth consists of the goods and services purchased with his money. He deals a lot with numbers and his riches consist largely of digitized blips in electronic machines.

As one moves down the socioeconomic scale, money in use becomes more represented by physical currency. The hand-to-mouth worker without a bank account likely deals with paper money and coins, and a paper check on payday cashed at a check-cashing business.

The homeless person and the low-pay worker deal with money on a concrete level and may not realize that the rich can practically create electronic money out of thin air with their computers and their financial wiles. The low-paid may not realize that the rich are screwing them over by shifting money out of their arena and into the stratospheric realm of the over-rewarded and caring not a whit about their welfare or their existence.

Turning people’s lives and welfare into numbers so divorced from hard reality is a feature of both the financier class and the government economist. Both deal with things and people en masse and necessarily miss seeing the real cases that make up the masses their numbers represent. They can also plug their numbers into formulae of their own devising or familiarity and reach conclusions or predictions slanted to accord with their biases. These conclusions, right or wrong, can then influence government policy.

Those in government must necessarily deal with masses of citizens, but besides surveying statistics and numbers produced by possibly ill-defined formulae, they must also be in contact with real people who suffer the brunt of ill-advised government policies and actions and they must be open to their complaints.

A comment by emal ( is relevant here:

Mr. President just because some ill defined gov't metric/statistic  states the "Great Recession is over" doesn't make it feel that way to 98% of us.

All of the above may sound as if I am opposed to fiat money, which is not true. I applaud the existence of fiat money because of the limitations and inflexibility of metal-based money. Fiat money makes it easier for governments to service the needs of their citizens, provided of course that governments consist of good people. Nellebracht again, in defense of government issuing (“printing”) fiat money:


There is nothing wrong with printing money, it's part of the government's legitimate role  in the economy.  The problem lies with where that printed money goes.  If it's used to finance bond-buybacks, we get increased speculation in markets and bubbles; essentially stagflation.
If it's used to stimulate consumption spending as opposed to investment spending, then the economy grows (i.e. increases output) until it is incapable of growing any further, at which point it inflates.  And this sort of inflation is true inflation, rising prices include wages, maintaining the purchasing power of wage-earners, while depleting the purchasing power (for both consumption and investment) of return earners.


Here is MMTer Warren Mosler again, quoted by Letsgetitdone:

I also add that anyone who understands actual monetary operations knows that the US can't run out of dollars to spend Congressional Appropriations unless Congress decides not to let the Government fulfill its obligations, that federal spending isn't dependent on taxing or borrowing, and that demand-pull inflation comes from excess demand that exceeds the real goods and services that are there to be produced and bought.


The federal government needs to step in with spending to raise employment. Not only does adding jobs help suffering individuals personally, it also increases spending, which aids in ending the Great Recession. Warren Mosler   ( proposes a federal job guarantee at $8 per hour for anyone willing and able to work. This would provide a transition from joblessness to work in the private sector. There is much useful work that could be done, even without competing with private companies. I would suggest, for example, mass tree plantings to help mitigate climate change.

Mosler, aware of the threat of further layoffs at the state level, also proposes that the federal government grant state governments revenue at the rate of $500 per capita.

These and other proposals Mosler makes are doable with the government's ability to issue fiat money, but problematic when one house of Congress is overloaded with Republicans. And of course austerity measures should not be considered--another problem area with conservatives.

Further Reading in Modern Monetary Theory (compiled by Selise):

Bill Mitchell, Stephanie Kelton, Warren Mosler, Marshall Auerback, L. Randall Wray, Pavlina Tcherneva: Fiscal Sustainability Teach-In and Counter-Conference

Lynn Parramore and new deal 2.0: The Deficit: Nine Myths We Can’t Afford

Warren Mosler:
Seven Deadly Frauds of Economic Policy

William Mitchell:
Barnaby, better to walk before we run
Stock-flow consistent macro models
Deficit spending 101 – Part 1
Deficit spending 101 – Part 2
Deficit spending 101 – Part 3

L. Randall Wray:
Understanding Modern Money: The Key to Full Employment and Price Stability

James K. Galbraith:
The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too

Much of this analysis is based on Modern Monetary Theory (MMT). It's a (relatively) new "Post-Keynesian" economic school of thought.  If you're interested in learning more, please follow our group, Money and Public Purpose.  Also, there is a small, but growing MMT wiki that is worth checking out.

Thank you for reading and reccing

8:53 PM PT: Update: Meteor Blades' Open Thread for Nightowls ( begins with a statement by MMT guru Randy Wray about the proposal for government jobs, adding details of the plan I mentioned. I recommend you read this very good introduction from the horse's mouth.

Originally posted to Money and Public Purpose on Sun Jun 12, 2011 at 08:00 AM PDT.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement and Community Spotlight.

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