Macroeconomic System for Climate Change
A U.S. Patent Application
Inventor: J.D. ALT (acknowledging all advocates of modern fiat money)
Assignment: To all citizens of democratic free societies
A macroeconomic system including the issuing of a fiat currency by a sovereign government; the establishment of a tax regime on the government’s citizens wherein the taxes levied can only be paid with the sovereign government’s fiat currency; the sovereign government’s debiting of its tax collection account to purchase goods and services from its citizens and their commerce; the sovereign government’s issuing of future fiat currency certificates—to be redefined as “treasury bonds”—which it trades, at a discount, for existing fiat currency held in private financial markets; the sovereign government then spending the traded-for existing fiat currency to purchase goods and services from its citizens and their commerce over and above what it is able to purchase by debiting its tax collection account;
Let’s Rebuild Mexico Beach
It’s telling that in the media coverage about the damage inflicted by Hurricane Michael, there are a lot of stories about how the citizens of Mexico Beach would like to rebuild their town, but no stories at all about how they might be enabled to do that. Only the opposite: why it’s going to be virtually impossible for Mexico Beach to ever be Mexico Beach again. Why is that?
In recent essays I’ve made reference to a new framing of what is actually happening when the U.S. treasury issues a bond. It seems to me, this new framing goes to the heart of MMT and might well hold the key to a practical implementation of MMT principles in real world applications. The framing is this:
A U.S. treasury bond is a certificate of issuance of future dollars.
I will expand on this in a moment, but first it is important to say what this framing says a treasury bond is NOT:
CHANGE THE SUBJECT
So, I will now, once again, court blushing naivete….
In the middle of a contemplative walk—during which, I confess, I was imagining with enthusiasm how the Democrats might extract revenge should they win the House of Representatives in the mid-term elections (hearings and subpoenas relating to the FBI “investigation” of Brett Kavanaugh, subpoenas for Donald Trump’s tax returns, drawing up articles of impeachment, etc.)—I was suddenly struck by the realization of what a terrible mistake it would be to do any of that.
Paying for Hurricanes
What you believe America can build—or rebuild—as a collective society hinges on how you answer one fundamental question: When the U.S. government issues a treasury bond, is it “borrowing” money that must be repaid with future tax-dollars—or is it “creating” money that can be spent to accomplish big and important collective goals?
Getting the right answer to this question could be existentially important. As I’m writing, for example, Hurricane Florence is unleashing historical damage to the U.S. Atlantic coast and inland areas. Over the next weeks and months, the inevitable debate will unfold over how much America can afford to “pay” to make the lives of tens of thousands of families and thousands of local communities whole and functional again. This time, perhaps, the debate will go even further: it might begin to earnestly ask the bigger questions about the future of our coastal cities and infrastructures in an unfolding era of climate change. These bigger questions will not involve billion-dollar budgets, but trillions of dollars of federal expenditures.
A report from the Mercatus Center at George Mason University calculating the “cost” of Medicare-for-all has received much attention recently—first, because Bernie Sanders claimed the report concluded that Medicare-for-all would save the American people $2 trillion over a 10-year period. That claim was still warm when the report’s author, Charles Blahous, told the Washington Post that Bernie’s interpretation of the report’s conclusions were blatantly false. In fact, Blahous told the Post, he posited that savings scenario based on a set of assumptions which he subsequently proved were so highly unlikely as to be impossible.
How big does the fire need to be?
I have written about this before, but it bears repeating now—and perhaps it bears repeating every week until somebody with more leverage than me picks the message up and carries it a step further: America (and the rest of the world, for that matter) has the resources needed to limit and mitigate the enormous damage and dislocations that climate-change is now beginning to impose. The “resources” I’m referring to are not dollars. They are materiel, labor, and human ingenuity. The only question is how and when we’ll stop simply raising warning flags and marshal those resources to take real action against the growing challenges.
The Explicable Mystery of the National Debt
America’s current “national debt” is tallied to be $21.5 trillion. When politicians and economic pundits talk (worry, fret, wring their hands, gnash their teeth) about this “debt” they implicitly assume—along with their listeners, readers, and potential voters—that this fantastic sum will eventually have to be paid back. That’s what happens with debts, right? Someone calls them due! Everyone also assumes the American tax-payer will have to do the paying. (Quick calculation to save you the trouble: Each one of us is in hock for $65,950!)
Depending on which political football is being tossed around, this “national debt” is either a crisis that must be addressed first (before anything else can be paid for!) or it’s something we can simply ignore for the time being—until the promised “economic growth” comes along that will somehow enable the federal government to collect that extra $65K from each of us. So long as we promise that Yes! someday we’ll pay it off, we can feel okay about going one more day, or month, or year without even starting to do so. In the meantime, of course, the “national debt” somehow keeps growing! At least that must stop, we declare! Our government must stop borrowing even more!
Last Exit to the Road Less Travelled
We now stand where two roads diverge. But unlike the roads in Robert Frost’s familiar poem, they are not equally fair. The road we have long been traveling is deceptively easy, a smooth superhighway on which we progress with great speed, but at its end lies disaster. The other fork of the road—the one less traveled by—offers our last, our only chance to reach a destination that assures the preservation of the earth.
Rachael Carson, Silent Spring
What’s important to keep in mind in this quote from Rachael Carson’s 56-year-old warning shot over the bow of corporate civilization is that there are two roads being traveled now. We are no longer at a fork. The fork is half-a-century behind us. The goal is not to get the superhighway to somehow re-route itself and follow the path less traveled. It can’t. The superhighway will, and must, continue accelerating in its inevitable direction, simply because the greed and power of the people driving that highway will not allow them to alter course. But if there is any truth to Rachael Carson’s warning (and there seems to be growing evidence of it) the other path—the Road Less Traveled—will become the surviving branch of our evolutionary diagram. The present goal, therefore, should be to create as many exits from the superhighway as possible—and to encourage and enable as many people as possible to take those exits to explore and follow the other path.
Why America is not a Country-Club
Everyone knows how a country-club works: Members pay dues, and the dues are used to pay for the expenses of running the country-club—maintenance and improvements, kitchen and service staff, golf-course mowing and landscaping, etc. Sometimes a big expense comes along (like putting a new roof on the main club-house) and the cash-flow from the monthly, or annual, dues isn’t enough to cover the one-time cost. In that case, the club would take out a bank-loan to pay for the new roof and the dues would then service the loan. It might be necessary, under those circumstances, to raise the dues to ensure that while the loan is being serviced the kitchen and dining services continue and the golf-greens are manicured. There would likely be a vote by a board of club-directors to determine if a due-increase was necessary.
Framing a Job Guarantee
Now that progressive leaders (Bernie Sanders, Kirsten Gillibrand and Corey Booker) have placed a proposed “Job Guarantee” program onto the mainstream political stage, it is essential they begin explaining the proposal’s underpinning macro-economic logic. Otherwise they lay themselves, and the proposal itself, wide open to scathing public ridicule—as exemplified by a recent Megan McArdle op-ed in the Washington Post (“A federal job for everyone?” April 25, 2018). But what should they be saying by way of explaining?
Framing the Progressive Platform
I keep reading the big challenge Democrats face in the 2018/2020 elections is that they have moved too far left, proposing a platform that includes “free” universal health care, “free” college tuition, “free” pre-school day-care—and a national infrastructure building and repair program paid for, not by the states, but by the federal government (i.e. “free infrastructure”). Progressives seem to genuinely wonder why mainstream Americans would object to these proposals. Why would American voters be put off by proposals they’d obviously gain so much real—and in many cases personal—benefit from?
Doing What the Market Can’t
What decides whether something is undertaken in America is the “market.” The way the market decides what is to be done is by determining whether people are willing to pay to benefit from the undertaking, how many people are willing to pay, how much they are willing to pay, and all this is then compared with the cost of the undertaking. If nobody is willing to pay for the benefit (no customers), the undertaking will not happen. If the number of people willing to pay, multiplied by the amount they are willing to pay, equals a dollar value less than the cost of the undertaking, the undertaking will not happen. If, in fact, that calculated dollar value is not some specified percentage GREATER than the cost of the undertaking (profit), the undertaking will not happen either. If the calculated profit is determined to be adequate, the undertaking will move forward and the cost of doing so will be invested in anticipation of harvesting the profit. These are the basic rules and dynamics of a Market Economy which is—for many good reasons—the chosen, championed, and cherished American economic model.
The Big Three
There is a lot more riding on our understanding of modern fiat money than we typically consider or discuss. Human society is now confronted with three epoch-defining challenges and, in each case, the understanding and strategic use of modern fiat money holds out the ONLY real possibility for constructively engaging the them.
The challenges are:
- Climate change & ecological collapse
- Assault on Democracy
- Mass migration
A Comfortable Betrayal
It would be a shocking scandal if it came to light that the professions of medical science had, for decades, known about an easy to treat, underlying cause of cancer—but conspired to obfuscate and suppress the information to protect their participation in a medical industry raking in hundreds of billions a year to treat the disease. Professional standings, tenures, licenses would be in tatters. Lawsuits would abound. Outrage would march on every city hospital and medical college in the nation—would it not?
THE SHIFT: Understanding and Using America’s Fiat Money
Before it disappears forever from our experience—which the rapid adoption of smart-phone commerce suggests might happen within the next decade—we should examine, take stock of, and fully understand what this piece of paper is that we call a U.S. dollar. Or maybe a five-dollar bill, which is what I happen to have pulled from my wallet in preparation for writing this essay. It doesn’t matter which bill we choose: they all have the same basic informational clues indelibly printed onto their durably woven, cotton-linen fabric.
We Pay versus You Pay
I was momentarily taken aback to read in the Washington Post that a primary reason Donald Trump was elected president of the United States was because of a little swampy area in the middle of an Iowa farmer’s cornfield. The cornfield in question belongs to an Angus beef farmer named Annette Sweeney who was both incredulous and outraged by the Obama administration’s new regulations on Clean Water. The regulations, known as WOTUS (Waters of the United States), established that the 1972 Clean Water Act applied not just to just major bodies of water, but also to their headwaters which, by circuitous routes, feed them. This headwater stipulation, by definition, included a ½ acre swampy place in the middle of the cornfield Annette Sweeney’s family had used to feed their beef cows for over two generations.
The New Poverty
We define poverty, I suppose, as that living condition which is unable to acquire enough dollars to purchase some, or most, of the basic necessities of life. It also seems to be an accepted notion that a certain amount of “poverty” is a necessary condition of our modern market economy—that a certain segment of the population will always be “unemployable” by the profit-oriented business community, either because they lack skills or because the business community simply does not need their services in order to generate its profits. Nobody really knows what to do with these “unneeded” people.
Defining the Tax Reform Battleground
The Republican tax reform will be criticized on many fronts. It is a battle of criticisms that will likely become as chaotic, ill-informed, and counter-productive as the tax reform process itself has been. This is because it will surely ignore the only strategic battle-front that ultimately matters: the basic premise of what taxes are for and why they’re necessary.
Millennial Agenda― (and how to pay for it!)
What follows is a to-do list for the next political power generation―the Millennials in whose hands the operation of America will begin soon, thankfully, to be grasped. The Boomer and GenX generations have succeeded in guiding America to the brink of social chaos and environmental disaster. Thankfully, the Millennials actually have the critical tool necessary to build anew what the 1% power-structures of the Boomer/GenXers have so greedily destroyed. All that is required is for the Millennials to step into their political power, grasp the tool, and begin the work.
Monetary Mental Illness
It is literally painful to watch our political leaders’ efforts to rethink and restructure how we are going levy taxes on ourselves as a collective society. It is like watching a family member struggling with mental illness: the demons being wrestled with are imaginary—yet they have the palpable force somehow of a granite wall. And as the struggle with this palpable monolith unfolds, even we—the clear observers of reality—forget that it is imaginary; when we do remember, the pain becomes excruciating for the simple reason that we know it is completely unnecessary.
Wouldn’t it be great if America had a fiat-money system?
Think of how many of our seemingly intractable local and national problems could be solved if only America had its own sovereign fiat-money system! Unfortunately, most Americans can’t even think about that question because they’ve never heard a proper explanation of what “fiat-money” actually is. Here, then, is quick solution to that problem:
How an American fiat-money system would work (in eight easy steps):
Solving the Political Problem
There was recently a breakthrough of sorts in media coverage for MMT. The Huffington Post published a piece covering the “People’s Convergence Conference” in Washington, D.C. on September 8-9. The conference brought together leaders and activists from all corners of the progressive political spectrum—including the “Draft Bernie for a People’s Party” movement. The conference apparently succeeded in creating the roots of a coordinated alliance between the leading progressive parties—including the Green Party, the Progressive Independent Party, and the Justice Party—which agreed, among other things, to the possibility of holding progressive primaries that would then field a single progressive candidate in the general elections. Most notable, however, the Huffington piece concluded with the header: Progressive Economics: “How do we pay for it?”
The Great Italian Experiment (part 2)
As I said, Italy, is now experimenting with paying for public services with tax credits. Presumably, this is happening because Italy doesn’t possess enough Euros to pay its citizens to provide all the goods and services needed to maintain and run the public sector of its social economy. And Italy can’t “create” the additional Euros it needs because that prerogative is the exclusive right of the EU Central Bank which Italy, even as a sovereign member of the EU, has no control over. But, as the news article explains, Italy still needs to have the grass mowed and the weeds pulled in its public gardens. So it has decided (out of desperation, the article implies) to pay the gardeners with tax-credits.
Italy’s Great Experiment
Italy is experimenting with giving tax-cuts to its citizens in exchange for public services―such as pulling weeds and cutting grass. Wow. What an amazing idea! The government issues a tax credit, and uses it to pay a citizen in exchange for the citizen’s services to the government. The government could even make this arrangement more formal by printing the tax credits on pieces of paper called “LIRIES” (or something like that) and paying for the weed-whacking services with this “cash.” That way the citizen who’s earned the “LIRIES” has the option of using them as payment to another citizen (who’d also like a tax-cut) for, say, a bag of potatoes. So, the first citizen pulls some weeds, gets paid in “cash” and then uses the “cash” to buy her dinner. If you thought about it, you could possibly run an entire economy in this fashion.
A Walk in the Forest after the Election
On November 8, I happened to be complacently immersed in one of the important books now available to the human species—The Hidden Life of Trees, by Peter Wohlleben. On the morning of November 9, I realized that what I was reading not only offered a perfectly analogous explanation of what “happened” in the U.S. Presidential election, but also laid out instructive insights about what’s to come next.
Recently, I’ve been trying to zero in on a peculiar set of ingredients that seem to be baked into our economic pie―and which are depriving that pie of a sustenance we, as a collective society, need it to provide. The peculiar ingredients have to do with our monetary system. Specifically, the fact that we―whether intentionally or by happenstance―have put in place and operate a money system that seamlessly creates dollars, as necessary, for profit-making enterprise, but specifically does NOT create dollars for not-for-profit ventures.
CROWDSOURCING the COLLECTIVE “WE”
Let’s jump ahead to the day (surely it will come, right?) when we realize a general consensus has actually been established that, yes, it IS possible to sustainably pay for collective goods and services by the direct issuing of sovereign fiat dollars―that our federal government doesn’t have to collect taxes in order to have dollars to spend, that it doesn’t have to issue Treasury bonds to get the dollars it needs but imagines it doesn’t have.
Now that we’re here in this future moment, it’s clear we have an even BIGGER problem than we had before!
My last essay, “A Perfect Example,” elicited six thoughtful and compelling questions from a reader with the moniker “MadcapMongoose.” They deserve an equally thoughtful response, which I’ve been trying to formulate, off and on, these past many weeks. Each formulation I come up with, however, seems to be missing a larger and deeper issue that I keep getting glimpses of. So, with apologizes to Mongoose, instead of answering him (or her) directly, I’m going to try to mine the topic obliquely to see if I can get at that deeper vein.
A Perfect Example
Recent news reports lament the on-going collapse of America’s coal industry―specifically the spectacular loss of jobs which is devastating not only families but entire local economies and communities. On a PBS news report, a woman who’d worked for a local mining company for thirty years teared up and asked the reporter, “What in the world am I going to do?” At a recent event sponsored by Wyoming Public Radio, attendees were asked to fill out 5X7 cards with suggestions about how to answer that question—how to replace the lost coal industry jobs.
I’m attracted to “big picture” vistas that put the day’s momentary developments into what at least feels like a meaningful perspective. It helps me to imagine things are more manageable than they otherwise seem to be. In reading my daily news (currently The Washington Post), I’m always on the lookout for at least two articles that fit together somehow to create a glimpse of this over-arching view. Today (Friday, 6 May) I got what feels like a pretty good peek.
False Choice or Real Possibilites
The essential ploy in politics is to give people a false choice. For dinner tonight, you can have fried potatoes—which are what I am serving—or you can have watered-down potato gruel, which is what my opponent is serving. Never mind that, if we take time to look, the larder is actually stocked with tomatoes, corn, zucchini, string-beans, hams and pork bellies.
The political false choice is usually quite subtle, and invariably involves whether you want to be taxed or not. The example I continuously stumble upon is Barack Obama’s 2015 State-of-the-Union proposal for universal child-care in America.
The Ogre & the Cog
Classically, we imagine money being aggregated by an entrepreneur who uses it to build a factory, purchase raw materials, hire labor, and begin manufacturing widgets which are then sold in the marketplace. This same result could be had by the process of an ogre appropriating a factory by intimidation, acquiring raw materials by force, and using slave labor to produce the widgets. The difference is that, in the first case, the process produces customers (the laborers) who can purchase the widgets with their wages, whereas—in the second case—the ogre’s widgets have no paying customers. One model produces an economy, the other model doesn’t.
Tax Credits and Dollars—Playing Charades with Low-Income Housing
Here is what the HUD.GOV website says about the status of low-income housing in America: “Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing. A family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States.”
Sovereign Spending in a Market Economy
Even if we assume the principles of modern fiat money will be generally accepted at some point in the future, we must yet confront the problem that sovereign spending is a difficult issue for market economies. It could easily unfold that even with the new “modern” money perspective in place, a serious recession could still find federal stimulus spending unnecessarily constrained. This difficulty was on full display in the last recession when Obama’s stimulus package was finally passed by Congress—appropriating $800 billion for the federal government to spend—only to then confront the almost burlesque-show entertainment of watching Congress and the Obama administration trying to figure out how to actually do the spending.
The Question I Wanted to Ask
I recently attended a panel discussion called by Bernie Sanders—and moderated by Stephanie Kelton—to discuss the crisis in Greece. The panelists were Joseph Stiglitz, Jacob Kirkegaard (of the Peterson Institute) and James Galbraith (who, it had been disclosed just a few days earlier, was part of a secret committee in Greece which evaluated how, and at what cost, an actual Greek exit from the Euro could be managed.)
A Push-Pull Model for Cooperative Markets Financed by Sovereign Spending
I recently outlined a sovereign spending structure for making “free” pre-school care and instruction available to every American child. After further consideration, I realize the proposal glosses over a fundamental issue posed by sovereign spending itself: Should it “push” or should it “pull” at resources to achieve a given goal?
Money causes labor to do useful things, and goods and services to be exchanged between people, thereby enabling people in general—both individually and collectively—to obtain what they need. In order for this process to occur in an optimal way—that is, in order for the maximum number of people to obtain what they need, individually and collectively, it seems clear that two basic conditions must be met: (1) there needs to be enough money to pay people to create all the goods and services they need, and (2) this adequate supply of money needs to be in the hands of people who are actually able and motivated to spend it for that purpose.
The Problem with Code Words
Christine Lagarde, managing director of the International Monetary Fund, was recently quoted in the Washing Post as having said something quite remarkable given the IMF’s historical position on monetary policy: “…we have to repeat over and over that monetary policy cannot be the only game in town, and that there has to be a combination of sound fiscal policies, use of fiscal space for those countries that have fiscal space in order to support growth and rejuvenate that growth.” The problem is, what do these words and phrases mean to most people who read them—including most U.S. politicians and economic pundits?
The squiggle illustrated here may look like the Ebola virus, but it isn’t. The resemblance is just an eerie coincidence. It’s actually a graphical snapshot of the classic “Predator-Prey Model.” This mathematical exercise, first developed in the 1920s, serves as the introductory basis for a more recent NASA funded effort which produced—amidst a brief flurry of news and commentary last spring—the startling conclusion that a complete collapse of modern civilization may now be “irreversible.”
BANK of the COMMONS
We usually think of a Commons as a “territory” of resources which we, as individuals, share with other members of our local, regional, or national society. The tragedy of the Commons, famously, is a failure of that sharing in which, even though the resources are visibly being depleted at an unsustainable rate, individuals are not motivated to preserve the resources but, instead, are motivated to continue to deplete them. This perverse motivation occurs because each individual makes two rational assumptions: (1) most other individuals will continue to deplete and (2) if he or she personally refrains from depleting, the beneficial impact on the Commons itself will be negligible, negating the personal effort or sacrifice. These rational decisions effectively neutralize the actions of the cooperative gene within the society, leaving the selfish gene in a position of active dominance….
Bank Dollars & Sovereign Spending
Why do so many people—including the authors of most economics textbooks—believe the U.S. banking system creates the U.S. dollars we earn and spend and pay our taxes with? It’s because the U.S. banking system does, in fact, “issue” the great majority of the dollars we use—by making loans to businesses and citizens which are not backed by “real” dollars the banks have on deposit. What everyone overlooks, however (for reasons not entirely clear) is the fact that these new loan dollars are “made real” by the U.S. government’s solemn promise to convert them at any time, on demand, into actual, “real”, sovereign U.S. dollars….
WORLD without BANKS
Sometimes it helps, if you want to see and understand something more clearly, to imagine the world without it. I just finished a book (“Rethinking Money” by Benard Lietaer and Jacqui Dunne) that was so thoroughly confused—and confusing—about how the U.S. private banking system “creates our money” (but perversely refuses to create enough of it) that I felt an overwhelming need to try to clarify, in my own mind, what the private banking system actually is. That’s when I got the idea of imagining a world without private banks at all—and trying to see at what point, and for what purpose, they become useful or, perhaps, even necessary.
The Sinking of Norfolk
How would Thomas Piketty propose to save the city of Norfolk, Virginia? He teaches us, ad-nauseum, that what the U.S. collective state has to spend on such things as sea walls, flood gates, elevating infrastructure and roadways, buying-out property owners so they can relocate to higher ground, etc., etc., is limited to the number of tax dollars that can be collected from U.S. citizens—as if the collective state itself were like a club, and if the clubhouse needs repairing, the club members must first pay a special assessment of dues—or, alternatively, the club can borrow dollars from the supply of Capital owned by the wealthiest 1% of its membership, or (as a creative alternative) the rebuilding effort could be structured in such a way that the newly elevated Norfolk would pay rent to the one percent in perpetuity for the privilege of living above sea-level.
Essay Contest for Congress
I’d like to propose an Essay Contest that might inform us better than any news talk show or presidential debate what we’re up against with our National Budget—and what might be the best course of action we should consider. Everyone in Congress should be required to participate, governors and state legislators who might become future congressional leaders should be encouraged to join in, and op-ed economic analysts invited to submit. The essays would be posted on a Congressional website established specifically to enable the public to vote on the best explanation of the topic. The topic I propose is this:
“COST” & CONFUSION
Even the most progressive proponents of climate change mitigation frame their argument with the proposition that the “cost” of mitigation today is far less than what the “cost” of climate change will be down the road if we fail to act now. While it sounds compelling, this argument perpetrates a deep confusion about what “cost” means when applied to the idea of inventing, designing and building the carbon-neutral infrastructure and energy systems that climate mitigation will require. This confusion, in turn, makes it more difficult for the political process to make rational decisions.
GROAF & CONTRAKSHUN
Recently I came across a passage from John Steinbeck’s Grapes of Wrath: One of the Joad-clan migrant farmer characters, upon learning that “there’s a newspaper fella near the coast, got a million acres,” replies—“If he needs a million acres to make him feel rich, seems to me he needs it ‘cause he feels awful poor inside hisself.”
Rescuing the 1%
In an earlier essay I suggested we just forget the 1%. This was an idea not entirely supported by the commentary that followed. On reflection, I’ve decided it isn’t the right approach after all. What we really need to do is rescue the 1%.
FORGET THE 1%
All this talk about the 99% versus the 1%? I say the easiest—and likely the most useful—thing to do is just forget the 1%. Write them off. Let them have their gated communities, their mega-yachts, their island retreats and off-shore bank accounts. What do we need them for?
MMT and the Struggles of Political Democracy
A principal dilemma of the theory of modern fiat currency (MMT) is the question of how the state spends the money it issues: who decides, and by what process? It may be frustrating to watch U.S. Congressmen and Senators bicker and behave as if their national government has run out of dollars, but it is sobering to consider what would happen should these legislative prodigies suddenly realize that, in fact, there are no currency constraints on their spending at all…..
The Dilemma of the Cooperative Gene
In the simplest terms, at some level the efforts of human society are being directed by the interaction of two genetic predispositions. The first predisposition views society as a loose-knit group of individuals or family units who are competing with each other for scarce resources….
Mobilization and Money
I’m nearly finished with a very long book that may well be the best illustration of the basic principles of Modern Money Theory available. The book is “A Call To Arms,” by Maury Klein. It is an historical account of the U.S. mobilization as it prepared for, and engaged in, war with Germany and Japan. The scale of the task was unprecedented in human history—and the accomplishment of it changed not just the structure of the American economy, but American society as well….
Doctrine of Mathematical Impossibilities
There’s a joke about a farmer and his pig. The pig is covered with a patchwork of large and small Band-Aids. A puzzled visitor asks the farmer: “Why is your pig covered all over with Band-Aids?” “Well,” says the farmer, “obviously, I can’t butcher him all at once: if I cut out too much he might die—and then I’d soon have nothing to eat.”
“Let it be Done” An Alternative Narrative for Building what America Needs
Somehow a great confusion has arisen. It has divided our nation into feuding, bickering camps, caused many to view their own government as a ruthless competitor, and is now seriously threatening us with, among other things, a frightening deluge of collapsing bridges. The confusion is about money—what it is, where it comes from and, most important, whether there is enough of it to pay for all the things we need as a nation.
The I.O.U. in the U.S. Dollar
One of the strangest things to understand about Modern Money Theory is why, if government doesn’t need your tax dollars in order to spend, does government tax at all? Here is an attempt at a new and “better” explanation. It is based on the insight that the government DOES, in fact, need to collect taxes, but the “taxes” it collects are not your “tax dollars.” This may sound like gibberish, but stick with me a moment and see if the following doesn’t make sense—and cast a new light on OTHER things as well (like, for example, the “national debt”).
Our Fiscal Anorexia
Many years ago, I had occasion to spend a long weekend at Ramuda Ranch in Arizona—a rehab facility where young women are helped to learn how to want to eat food again. Anyone who has had a personal encounter with Anorexia Nervosa knows what a mystifying and frightening experience it is….
Real Dollars and Funny Money
I keep trying to unravel the confusion knotted beneath the surface of our public discourse about money. For example, it seems evident that most people believe that U.S. Dollars are “created” by business entrepreneurs making profits. Until this happens, the understanding seems to be, the number of dollars available for everyone to try to get some share of is like a big lake of money we’re all drinking from, with the biggest drinker of all being the U.S. government….
MMT and Social Norms
Chris Hayes’ recent MSNBC show on the Trillion Dollar Coin brought four aspects of the Modern Money debate, for me at least, into a clearer focus. I list them here not in their order of appearance on the show, but in their order of importance and logical connection….
The Strange Reality of Fiat Money
It is time to come to terms with the fact that U.S. dollars are what economists call “fiat money”. Having acknowledged this—and it’s difficult not to accept it as true since the U.S. abandoned the gold-standard over forty years ago—it might be worthwhile to give some consideration to what “fiat money” actually is and the peculiarities of how it works.
It was in the year 2020 that a majority of people first began to “see” what money is. For a few months—after the “realization” started hitting the pages, airwaves, blogs, tweets and twits of mainstream media—it became a silly joke: “2020 perfect vision, at last! How could things have been so blurry for so long?” For thousands of years, in fact.
Missing Link in Tax Overhaul
In Tuesday’s Wall Street Journal (Capital Journal, Looking Past Fiscal Cliff to a Genuine Tax Overhaul) Gerald Seib lays out a very sensible argument about why the U.S. tax code needs to be rewritten “for the 21st century.” He points out that the tax code we are using was created in 1913 (before the Great Depression and the New Deal, I might add) and was last revised in any meaningful way in 1986….
Modern Money and the Altruistic Gene
In his recent book The Social Conquest of Earth, Edward O. Wilson lifts a corner of human history and reveals what appears to be a hidden mechanism of its intricately complex guidance system. It shouldn’t be a surprise this inner clock-work is genetics. What is surprising is to see the relationship between this genetic mechanism and the monetary debate that is unfolding as we speak.
New Sense—Common Sense
The principal dilemma of the progressive cause is that it has allowed a bedrock conservative premise to go so long unchallenged; indeed the progressives themselves have either overtly or implicitly agreed with the premise, making it virtually impossible for them to effectively advocate their goals….
Men on a Wall
I recently saw a newspaper photo of ten or twelve men sitting on a crumbling stone wall beside a dirt road. It was somewhere in Africa, but the location doesn’t matter. What matters is that the men, as the caption made clear, were sitting on the wall because they had nothing else to do: they had no land to farm, there was no local job or employment available to them, they had no savings or credit with which to start some venture. So they sat….
Playing Monopolis Monopoly: An inquiry into why we are making ourselves so miserable
Why does it seem like there isn’t enough money to pay for the things we really need? The headlines are filled with stories about our nation’s “debt problem” and dire warnings about our impending “bankruptcy.” As an architect who fills his waking hours thinking up all kinds of wonderful things we could be building, I’m alarmed by the idea there isn’t enough money to pay for any of them….