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Hi Jason,This all sounds very fascinating and I'm looking forward to your presentation! I am wondering what your familiarity with and opinion of cryptocurrency is, and how you think it might solve or fail to solve some of the issues that you've presented here? You don't have to answer now, as I realize that is a whole separate area of discussion. I am curious, though, as I currently manage an online community for Stake Pool Operators (creators and contributors of/to the transactional accounting ecosystem) for the Cardano cryptocurrency protocol. I've been impressed with the proposed solutions of the platform to large-scale economic issues, but I lack a traditional (or even modern) understanding of economics to be able to evaluate this from a perspective outside of a crypto-positive angle. May ping you for discussion on this if time allows :)Best,Cole ButlerFaculty SpecialistProject Coordinator: Treating Parents with ADHD and their Children (TPAC)University of Maryland2103W, Cole Field House | College Park, MD 20742tel 301.405.6163########################################################Hi Alex,
I think Seven Deadly Innocent Frauds of Economic Policy by Warren Mosler (particularly Part 1, pp. 13-68) is a terrific intro to MMT. Mosler is a a very clear and articulate writer.
As I began saying yesterday on the issue of taxation:
As a matter of logical ordering, the currency had to have been spent into existence first before that currency could be taken back in taxes. Thus, (and let's use the U.S. federal government as an example), federal taxation doesn't actually function to fund federal expenditures.
The primary function of federal taxes is to create demand for the intrinsically worthless currency. You could think of U.S. dollars as federal tax credits.
The government issues the currency, then imposes taxes which can only be satisfied by that government's own currency.
After that, taxes function to help regulate the economy... for example, to control inflation by draining excess currency from the economy. Taxes can also function to discourage certain behaviors deemed undesirable --- for example a high enough tax on pollution should discourage polluting behaviors.
Together, spending and taxation are referred to as fiscal policy.
Now, the same can be said for "borrowing". The currency had to have been spent into existence first before that currency could be "borrowed". Thus the "borrowing" must serve some other function than funding the expenditures of a currency issuer, as well.
In short, "borrowing" is just the issuing of Treasury Securities, the function of which is to drain reserves out of the banking system, so that the central bank can hit its targeted interest rate. The less reserves, the higher the interest rate, and vice versa.
The targeting of interest rates is referred to as monetary policy.
More later.~ Jason BesseyOn Friday, September 11, 2020, 06:11:25 AM EDT, Alex Goodall <[log in to unmask]> wrote:Very helpful - thanks, Jason.I'm out of my depth here, so I'm not going to attempt any defence of PM - except...I wonder how much Randall really studied PM. I say that because he says it's not clear whether PMs proposal for central banks to create money was that it should be physical money (notes and coins) or electronic money. Even a cursory review of their proposals makes it clear they are proposing electronic creation. Perhaps the apparent incoherence comes from insufficient study.What is less known, is that the originators of PM looked deeply into how the Bank of England's internal accounts works. They documented how those accounts currently work, and how they would need to be changed to implement the PM proposals. I'm unclear whether any of that corresponds with the "accounting" issue.And they worked out how to make the transition incrementally to counter accusations that it would be too disruptive.And they even wrote the parliamentary legislation that would need to be passed!I look forward to learning more about MMTAlex########################################################Hi Alex,
Thanks for your response, Alex.
To answer your question, no, MMT doesn't align with Positive Money. MMT economists will generally argue that PM fundamentally misanalyzes currency and is incoherent. I remember a few years ago, there was actually a lot of back-and-forth between the two schools of thought.
Another criticism of PM by MMT economists is that there's no accounting, which is fundamental to MMT, particularly a macro-accounting identity called "sectoral balances", which I'll get into a little later.
Here's a short video (under 7 minutes) of MMT economist, professor Randall Wray from the University of Missouri at Kansas City, giving a basic critique of Positive Money: https://www.youtube.com/watch?v=PEnbuW6aaNg
A fundamental premise of MMT is that there are
- Currency issuers and
- Currency users
As the names suggest, currency issuers issue the currency, and currency users merely use the currency.
Examples of currency issuers would be the U.S. federal government, (the U.S. dollar), the Canadian national government (the Canadian dollar), the Mexican government (the peso), the U.K. government (the pound sterling), the Japanese government (the yen), etc.
That is, currency issuers have a monopoly on creating their own respective currencies.
Examples of currency users would be households, businesses, and U.S. state & local governments. That is, they do not create currency. They must acquire the currency first (e.g., through work, investments, taxes, etc.) before they can spend. The Eurozone would be another example of currency users since each of those countries gave up their power to issue their own respective currencies, and now are just users of the euro.
I'll end with this final thought for now...
Why would currency-issuing governments need to tax or "borrow"? Indeed, as a matter of logical ordering, they would need to spend their currency into existence first before there would be any of that currency to tax or borrow! Hence, taxes and borrowing must serve some other function(s) than funding the spending of such governments. If anything, it's just the opposite --- it's the spending that funds the taxpayers and the "lenders"!
I'll dig into that in my next post!
Have a good one,
Jason BesseyOn Thursday, September 10, 2020, 02:37:57 PM EDT, Alex Goodall <[log in to unmask]> wrote:Hi JasonThat's interesting.Some years ago I was involved with Positive Money in the UK. I don't recall them talking about MMT (but I could be wrong).Their core idea is to educate people to understand that new money is currently created as debt by banks (so economic growth must always be accompanied by growing debt), and the proposal that instead, new money should be created debt-free by the central bank. Alongside that, monetary policy should be focused on how much money to create (to avoid inflation/fund public spending/boost the economy as needed), rather than controlling interest rates - which should be left to the market.Does that align with MMT?There are some very nice, easy-to-understand (albeit a little dated) videos here:Video 7 provides a good summary.Alex########################################################----- Forwarded Message -----From: nysa71 <[log in to unmask]>To: Henriques, Gregg - henriqgx <[log in to unmask]>Sent: Thursday, September 10, 2020, 10:24:25 AM EDTSubject: Re: picture bio descHello ToK Community,
My name is Jason Bessey, and I'm 49 years-old from Skowhegan, Maine.
I've long had an interest in psychology and the social sciences, in general. I first heard of the ToK back around 2004 when I was a psychology major at the University of Maine at Farmington via Steve Quackenbush, also a member of this community.
I was very interested in the theoretical unification of psychology, and I found Gregg's proposal quite intriguing. I very much appreciated someone attempting to address psychology's theoretical fragmentation.
I found other fields in the social sciences interesting, as well --- such as anthropology, sociology, and political science. Furthermore, I could grasp the concepts in those fields.
But economics was strangely a different story. I wanted to understand it...but couldn't make heads-or-tails of it! It just didn't seem to make a lot of sense. Or to be more specific, orthodox economics didn't make any sense to me. It just didn't seem ---- right...but I couldn't quite put my finger on it.
So I delved into more heterodox schools of economics. Around 2009, I discovered Georgism --- a school of thought based on the writings of late 19th century political economist, Henry George. For the first time, economics started to make sense to me. George was deeply concerned with the increase of poverty in the midst of progress in his time --- hence the name of his popular book, Progress & Poverty, in which he based his analysis on the classical three factors of production: land, labor, and capital. His conclusion was that there should be a single tax on land, and there was a significant international "single tax" movement that followed and continued decades after his death.As much as I appreciated George's thought, though. I never thought he got the concept of money quite right. So I asked myself, "What is money?" And I found this question extremely difficult to answer.
So for the next two years, I grappled with this question. Around 2013, I saw this mention here and there on social media about something called Modern Monetary Theory (MMT). So I Googled it, read a brief blog post on it, and immediately knew I found the answer to my question.
MMT, in short, is (at its core) a description of how sovereign currencies actually function, and has been developed by many professional economists over the years. The interesting part is that that description is significantly different than what's been described to us by mainstream economists.
Furthermore, I began to realize that, in modern political discourse, we're framing questions about fiscal and monetary policy all wrong...and that's standing in the way of us dealing properly with the pressing issues of our time --- a sort of progress-and-poverty problem in our day!
So I look forward to sharing with you what I've learned about MMT over the years, and I hope you'll find it of value, too.
Sincerely,
Jason BesseyOn Monday, September 7, 2020, 07:42:43 AM EDT, Henriques, Gregg - henriqgx <[log in to unmask]> wrote:Hi Jason,
Could you share a brief narrative/bio about you and your interest in MMT and a title? Also, a picture would be great. I will then announce in the next few days.
Best
G
___________________________________________
Gregg Henriques, Ph.D.
Professor
Department of Graduate Psychology
216 Johnston Hall
MSC 7401
James Madison University
Harrisonburg, VA 22807
(540) 568-7857 (phone)
(540) 568-4747 (fax)
Be that which enhances dignity and well-being with integrity.Check out the Theory Of Knowledge homepage at:
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