Randy Wray: MMT Without the JG?

By L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City and Senior Scholar at the Levy Economics Institute of Bard College. His book, Modern Money Theory, will be available in August. Cross posted from New Economic Perspectives

Lambert here. As MMT increasingly gains mainstream popularity and some traction in policy-making circles, some MMT advocates and detractors have found a policy prescription put forth by MMT scholars — the Jobs Guarantee or JG (Mitchell; Mosler (“must read”); Kelton; Tcherneva; literature review) — problematic. Wray’s post may address some of their concerns.

* * *

The contentious issue is this: can one adopt MMT while rejecting the JG?

I had made the analogy between disease and unemployment: would any reasonable person who understands the cause of a disease oppose a cure? If you knew that a vaccination can prevent smallpox, would you oppose providing vaccinations (at least to those who want them—I do not want to get into a debate about forcing vaccinations as we have never advocating forcing jobs on those who do not want to work)?

Now I do realize this is not quite a fair comparison because it is possible that there are many cures for the disease of unemployment. MMTers advocate the Jobs Guarante (JG) cure. I am open to alternative cures. I just do not hear any coming from the critics.

Some try bait and switch: Let’s give them a Basic Income Guarantee (BIG) instead of jobs. That does not cure the disease of unemployment. It is like providing antibiotics instead of vaccinations to fight Polio. They then try to justify this on the argument that if we give people BIG, they can still choose to work if they want to. No, they cannot. There must be jobs. Certainly it is true that giving everyone antibiotics does not prevent them from seeking vaccinations. But the vaccinations need to be available. I’m not going to argue more about this—the argument is just too silly. Yes we can give people BIG but that does not give them jobs. If someone is involuntarily unemployed, she wants a job. BIG will not cure the unemployment disease.

Can we have BIG and JG? Sure. But it is the JG that cures the disease of involuntary unemployment. (Some claim BIG cures the disease of poverty; I doubt that, but it is a different disease.)

Some argue for demand stimulus alone. The theory is that if government spends enough on “general” demand, jobs will trickle down in sufficient numbers that everyone (?) who wants one will get one. When pushed, they will admit that they really do not mean “everyone”. They mean the rate of involuntary unemployment will be reduced “sufficiently”. Sufficiently for whom? Well, for those who get the jobs.

See the Vonnegut quote below. Those who do not get the jobs are not deserving. Better luck next year. Go improve yourself so that you can get a job and some other unlucky shmuck goes jobless. There are always winners and losers—and you happen to be a loser. In your next life, choose better parents. You all know the drill. And, yes, that means people of color will have three times the unemployment rate of the luckier whites (and in most countries, females will have higher rates of joblessness) but that is just the luck of the draw when it comes to job creation through demand stimulus.

Again, this is a bait and switch argument. Aggregate demand stimulus will likely create more jobs. For everyone? No.

Further, it begs the question of what to spend on. Except for random helicopter drops (or tax cuts) all spending (and tax cuts) is targeted. The only question is to whom. It is really strange that many opponents of the JG dislike the targeted nature of the program, yet, they like the targeted nature of Congressionally-approved spending that will go to the usual suspects: big oligopolies that tend to have higher skilled and paid workers and strong pricing power, as well as the much maligned pork barrel roads to nowhere. And, finally, it evades the inflation issue. If jobs do indeed trickle down, it is at least in part because the targeted “general” pump priming pushes up wages and prices in those favored sectors sufficiently that employers look to workers who are less desirable.

Can we have demand stimulus plus a JG? Sure. But it is the JG that cures the disease.

Others protest that the JG creates low-paying jobs that won’t utilize all the skills of the workforce. Hence it does not really resolve all the problems of unemployment and so instead we need a combination of demand stimulus, skills matching services, and retraining. Again, another bait and switch argument.

While demand stimulus plus active labor market policies are desirable, they do not ensure that a sufficient supply of worker-ready jobs is created. As discussed in previous blogs, the JG “takes workers as they are, where they are”. Training programs train workers on the hope that jobs will exist and that employers will hire them. It is faith-based policy.

JG creates jobs for those who want them, then trains workers on the job. If the better, higher-paying jobs do come along, they can move out of the JG. Meanwhile, they’ve got the job and are allowed to contribute to social production.

Some still persist in arguing that the JG is “just” workfare—that it forces people to work. No. It provides a job for those who want one. It hires the involuntarily unemployed. Involuntary describes a situation that one does not want; unemployed means without a job. Involuntarily unemployed people want jobs. The JG offers jobs. No one is required to take one.

JG can be added to any safety nets society wants—whether non-means-tested programs like BIG, or means-tested programs like welfare. That is why I said the JG is a policy “add-on”.

Recall that I began the discussion of the JG [earlier in the series] with an exposition of Lerner’s functional finance approach to policy and with a discussion of human rights. The first of these builds on the “state money” view that government can afford to buy anything for sale in its own currency. It then derives a policy—that is what government SHOULD DO: spend more if there is unemployment.

The second comes at the topic of unemployment from the human rights angle: the right to a job is one of the internationally recognized human rights. Again, this is about what government SHOULD do: ensure that anyone who wants to work has access to a job. While consistent with Lerner’s proposal it goes further. For Lerner unemployment is an economic waste—since government can “afford” full employment, it should ensure it. From the perspective of human rights, unemployment is evidence of a violation of human rights.

Clearly, this is a violation of a human right by government as no one should expect for-profit firms to ensure this right. Only government can “afford” to ensure this right. Further, it is the position of MMT that imposition of taxes creates a demand for money—from inception, one with a tax liability but without the means to pay it is in some sense “unemployed”, searching for a way to earn the money needed to pay the tax.

Carried to the logical extreme, we can say that unemployment is created by the monetary system (as Paul Davidson always points out, there is no unemployment in a nunnery—economic systems that are not based on money do not have unemployment), a system that from inception was created by government to move resources to the public sector. Thus unemployment is not just a problem to be resolved by government, it is a problem that is created by government. And sovereign government has the key: provide the jobs. Warren Mosler always says the unemployed are already in the public sector—we have to support them and deal with them in some manner—so we might as well let them work for the public sector.

Now, I admit that some other advocates of MMT do not accept the human rights angle. But I do. Still, as I argued before, human rights are aspirational and even rich, developed, and nominally democratic nations persistently violate most of the accepted human rights. In my view, that does not diminish the value of the argument.

In the comments section from Blog 48, someone provided the following statements by MMT advocates:

Bill Mitchell: “The reality is that the JG is a central aspect of MMT because it is much more than a job creation program. It is an essential aspect of the MMT framework for full employment and price stability.”

Pavlina Tcherneva: “The JG is not just an afterthought to MMT but a crucial component that has so far offered the most coherent counter-cyclical economic stabilizing mechanism.”

Neil Wilson: “Discussing MMT without the Job Guarantee is to discuss some other economic theory, and one without any stability anchor to nominal prices.”

The commentator then wrote: “It does appear that Wray is parting ways with his colleagues here. Can someone clarify this contradiction?”

While I find that statement puzzling, let me try to clarify.

MMT has three levels or aspects: description, theory, and policy.

As a description there are actually two levels. First we describe a “pure” or “hypothetical” case that applies to any currency issuer. We begin with the imposition of the tax denominated in the state’s unit of account; the state then spends the currency into existence, moving resources to the public sector; people then can pay their tax. To that we can add private sector “money creation” as a leveraging activity. We discuss interest rate setting and the purpose of government bond sales. We note that no one can pay taxes until government spends currency into existence. And so on. I won’t repeat all the analysis presented in previous blogs.

Then we describe actual practice. This must be case-specific. This is where we bring in a Treasury and a Central Bank since most governments divide responsibilities between the two. We also need to discuss self-imposed constraints (Treasury writes checks on its account at the Central Bank, which is not permitted to buy Treasury bonds. And so on.) In other words, we discuss “how government REALLY spends”, going into all the operational details. This does not change any of the general conclusions from level 1 analysis, but it does respond to the critics.

Next we move to theory. In truth there is no description without theory. I realize that many people, including economists, think that you can describe the “real world” without theory or value judgments. Uncle Milty Friedman was famous for pushing such a view—“normative” versus “positive” economics. This was at best a naïve view—or, more likely, a purposeful deception designed to hide his agenda. It cannot be done. You cannot observe “reality”. To make sense of your observations you must have a theory. You cannot use a word like “money” without having a theory of money. The theory held by most people is, according to MMT, completely inappropriate for the type of economy in which we live. Indeed, this whole Primer really boils down to an argument about the “nature of money”.

That is the topic of the final chapter of the soon-to-be-published book. However, if you look back to MMP #30 you will see how I defined MMT as an integration of several approaches to monetary theory, including Chartalism, Endogenous Money, Monetary Theory of Production, Functional Finance, Sectoral Balances Approach, and Circuit Theory. Personally, I’d also add Minsky’s Financial Instability theory and probably a few other bells and whistles.

Now does every MMTer have to integrate every one of these approaches into her own MMT approach? No, that would be too much to ask. Do I like my own approach better than the approaches taken by others? Yes. Of course, I need to convince others that mine is best. At least until I change my mind.

The third aspect is the policy implications. So far today I’ve been focusing purely on JG as a solution to the unemployment disease. But that is only part of the story. From the beginning, we have argued that the JG is needed to “anchor” prices. The JG is a bufferstock program and like all bufferstocks it can be used to stabilize prices. Further, it helps to resolve that Minsky problem—instability—by helping to stabilize (actually, reducing instability, but stability is destabilizing!) wages, consumption, employment, and aggregate demand.

Inflation is the topic for next time. But very briefly (and really this is just a reprise of the explanation of the bufferstock made in a previous blog), you can use the JG pool as a better wage- and price-stabilizing bufferstock than the “reserve army of the unemployed” can be.

Look at it this way. The great fear of our goldbugs and others who warn about the danger of “fiat money” is that it has no commodity anchor to keep it valuable. Since it is “fiat”, government can print up unlimited amounts, give it away free, and drive its value to zero. Zimbabwe here we come! Tie it to gold and you cannot get inflation—so the story goes.

The goldbugs are not completely crazy. Money does need backing—and an infinite regress, arguing that we accept money and believe in its value because we think others think it is valuable, is not acceptable.

In the MMT view, taxes create a demand for the currency, but currency’s value is determined by what you’ve got to do to get it.

There is a long tradition in economics that adopts a “labor theory of value” approach. As both Marx and Keynes argued, the value of commodities (here I’m using the term broadly to include all things produced for sale for money—not just the “resource” commodities like oil and pork bellies) can be taken to be determined by labor. More specifically, we use labor hours as one of our units of measurement to assess the value of all things produced by (admittedly heterogeneous—thus we need to make quality adjustment)s labor. The other measuring unit is money—the state’s unit of account.

Now, I do not want to get into a debate about labor value theory. My point is much simpler and highly intuitive: if I must work an hour to get something valued at one unit of the money of account it will be more valuable than if I received two money units per hour of work. If money grew on trees (our moms always claimed it does not!) then it would be worth the effort of going out to pick it. Not much, in other words. Clearly, modern money takes very little effort to produce (keystrokes create government IOUs), so the goldbug fear is that its value will fall to nearly zero as we increase the number of keystrokes.

But what if government will only issue $1 in return for 1 hour of hard labor? Will the number of dollars issued make much difference in its valuation?

At UMKC we’ve been running exactly such an experiment, imposing a “Buckaroo” tax on our students for the last dozen years, and paying them 1 Buckaroo for each hour of work at local community service providers. They pay the tax using the Buckaroos they earn. We’ve run budget deficits every year since the program began, fulfilling the net saving desire of students. Our students are fully employed—they choose how much to work and we ensure there is always a job available. The MMT principles have been verified by the program.

Oh, what about inflation? Zero, Zip, Nada. The wage is still exactly 1 Buckaroo = 1 Student Hour of Labor.

We let the exchange rate float to give us complete policy independence. Have all of those budget deficits reduced the Buckaroo exchange value against the Dollar? No—the Buckaroo has appreciated more than the Swiss Franc! According to Warren Mosler, the Buckaroo has been the best investment in the world over the past dozen years (although I have not fact-checked that).

Oh, alright it is a simple little real world experiment, so the results might not scale up to real world currencies, but it does shed some light on the value of a bufferstock to give value to a currency. Tie your currency to labor, and stabilize wages in that currency. That will provide full employment with a greater degree of price stability.

So that is the additional argument for tying the JG to MMT: price stability. ….

[T]his is why MMTers believe that the JG is a necessary component of MMT: if you care about inflation, you want a price anchor. So far as I know, no one has come up with a better price anchor than a relatively stable wage unit. The JG provides that.

Let us quickly return to the argument that unemployment serves a useful public purpose, hence, we do not want the JG because it adversely affects incentives. We need the suffering to motivate the lazy.

There is a popular view that adversity is good. As Joe Firestone put it in a comment, many attribute their success to the beatings their fathers gave them: “spare the rod, spoil the child”. The threat of unemployment and deprivation is believed to be an essential motivator.

In truth, modern psychology knows this is false—the best way to produce caring and productive people who will make socially beneficial contributions to society is to provide a caring, nurturing, and secure upbringing. The best way to promote quality work is to create a caring and secure work environment. As I’ll discuss next time, this is all the more important as we transition to the “service economy”.

If you want to produce psychopaths, beat the crap out of them when they are young, convince them that the world is dog-eat-dog, make them fight for every scrap of food, and eliminate all protection in the work place. Make life as precarious as possible, with workers fearing they could be replaced by the unemployed—losing their jobs and joining the ranks of the starving masses. Richly reward the strong and punish the weak. (I think I just described an entire sector of the modern economy, where the psychopaths rise to the top—see below.) That is the idea behind NAIRU, which is so dear to the hearts of most economists.

Here’s the problem. Our society does produce a lot of psychopaths, and their behavior can lead to individual success at least on some measures. The rest of us—the 99% or so—have got to protect ourselves from them. However, their relative success makes that difficult not only because they can obtain positions of great power and influence, but also because we emulate them. In Chapter 24 of the General Theory, Keynes remarked that it is better to allow such psychopaths to inflict cruelty over their balance sheets than on their fellow humans. In other words, let them make money, but don’t let them run the show. As we all remember, he advocated policy measures to ensure full employment, to reduce inequality, and to “euthanize” the rentier class:

dangerous human proclivities can be canalised into comparatively harmless channels by the existence of opportunities for money-making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandisement. It is better that a man should tyrannise over his bank balance than over his fellow-citizens; and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative”. Of course our 1% psychopaths will oppose these policies, since the psychopaths thrive in the current, unequal, environment.

An editorial in the NYTimes put it this way:

“A recent study found that 10 percent of people who work on Wall Street are “clinical psychopaths,” exhibiting a lack of interest in and empathy for others and an “unparalleled capacity for lying, fabrication, and manipulation.” (The proportion at large is 1 percent.) Another study concluded that the rich are more likely to lie, cheat and break the law…. Accounting fraud, tax evasion, toxic dumping, product safety violations, bid rigging, overbilling, perjury. The Walmart bribery scandal, the News Corp. hacking scandal — just open up the business section on an average day. Shafting your workers, hurting your customers, destroying the land. Leaving the public to pick up the tab. These aren’t anomalies; this is how the system works: you get away with what you can and try to weasel out when you get caught.

….while “job creators” may be a new term, the adulation it expresses — and the contempt that it so clearly signals — are not. “Poor Americans are urged to hate themselves,” Kurt Vonnegut wrote in “Slaughterhouse-Five.” And so, “they mock themselves and glorify their betters.” Our most destructive lie, he added, “is that it is very easy for any American to make money.” The lie goes on. The poor are lazy, stupid and evil. The rich are brilliant, courageous and good. They shower their beneficence upon the rest of us.”

Psychopaths on Wall Street are not the 10% anomaly, they are the Gordon Gekko role models. They are the 10% top dogs of the 1% that run the show.

And so it is not surprising that there are individuals who accept MMT as a description yet who adopt the policy recommendation of our successful psychopaths: use unemployment and the threat of poverty as motivation to “pull one up by one’s own bootstraps”. Yet that policy simply perpetuates the production of psychopaths and anti-social behavior more generally. As Keynes put it, such policy stacks the game with more zeroes—increasing insecurity and actually making it harder to achieve success with just normal luck. All pain, no gain.

A psychopath could discover the cause of Polio and yet oppose a policy of vaccination. Indeed, lack of compassion is part of the definition of psychopathology. Surely a psychopathic economist can accept MMT’s explanation of the cause of unemployment and yet reject policy to cure the disease.

So, can you separate the modern theory of the disease cause of Polio from the cure? Yes.

Can you separate the MMT explanation of the cause of unemployment from the policy to cure it? Yes.

Should you? Of course not.

NOTE Wray’s post is part of a series of blog posts at NEP titled The Modern Monetary Primer, which were both based on, and refined, the manuscript for Wray’s book mentioned above. The original post includes meta material related to the NEP blog, which I have removed here.

NOTE Wray’s post is part of a series of blog posts at New Economic Perspectives titled The Modern Monetary Primer, which were both based on, and refine, the manuscript for Wray’s book mentioned above. The original post includes meta material related to the NEP blog, which I have removed here.

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About Lambert Strether

Lambert Strether has been blogging, managing online communities, and doing system administration 24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs about rhetoric, software engineering, permaculture, history, literature, local politics, international travel, food, and fixing stuff around the house. The nom de plume “Lambert Strether” comes from Henry James’s The Ambassadors: “Live all you can. It’s a mistake not to.” You can follow him on Twitter at @lambertstrether. http://www.correntewire.com

186 comments

  1. F. Beard

    No, they cannot. There must be jobs. Randall Wray

    Do the rich need jobs or do they work when, where, how and how much they want to?

      1. F. Beard

        I don’t see the necessity to provide “jobs”. Someone with adequate resources can find their own meaningful (at least to them) work to do.

        And if we had a just society instead of banker fascism then far more people would have adequate resources.

        The problem is lack of justice, not lack of jobs per se.

        1. Dismayed

          Seriously? Then how do you explain the millions of people who were working and now find themselves without jobs? I can only hope that you, too, lose your job. Then maybe you’ll understand what it’s like to find work during a major economic contraction.

          1. F. Beard

            Then how do you explain the millions of people who were working and now find themselves without jobs? Dismayed

            The population was driven in onerous debt by the banking system.

            I can only hope that you, too, lose your job. Dismayed

            I don’t think you understand. I advocate that the entire population just be GIVEN new money until ALL private credit debt is paid off. Get it? MONEY – the stuff people work for?

            The population does not need make-work; it needs money. The JG is just a flimsy excuse to give it to them when NO excuse is needed. The population has been CHEATED by the banks. They DESERVE restitution.

            Your apology for wishing me ill is accepted in advance.

      2. They didn't leave me a choice

        Jobs are nothing but a means to acquire resources to live on one end and to provide a service that society supposedly needs on the other, they are not an end by themselves. Or at least they should not be, but there’s this weird fetishism all over the place about how just having “jobs” somehow makes us whole and good.

        1. Calgacus

          Jobs are nothing but a means to acquire resources to live on one end and to provide a service that society supposedly needs on the other, they are not an end by themselves. Or at least they should not be, but there’s this weird fetishism all over the place about how just having “jobs” somehow makes us whole and good. Right. Which is why not having a JG is insane. It’s not jobs fetishism. Who is anyone to deny somebody the “means to acquire resources to live ” by “provid[ing] a service that society supposedly needs”. Somebody who supports this is arguing for a monstrous, insane position, whether they understand this or not, usually not. Throwing money at the problem, a BIG, might work for a while for most, but it’s palliating a symptom, not curing a self-inflicted, unavoidable disease, for which the JG is the only possible, and very obvious, natural cure. The JG just returns the level of self-understanding of economics of modern “advanced” monetary economies to that of “primitive” non-monetary society.

          1. F. Beard

            Who is anyone to deny somebody the “means to acquire resources to live ” by “provid[ing] a service that society supposedly needs”. Calgacus

            And who decides what society needs? Once it was decided that society needed very expensive tombs for the Pharaohs. Once it was decided that society needed more “lebensraum”. Once it was decided that society needed backyard blast furnaces.

            What society needs is justice! The unemployed have been dis-employed with their own stolen purchasing power and the general population has been driven into debt by the same means.

          2. Calgacus

            And who decides what society needs? Once it was decided that society needed very expensive tombs for the Pharaohs. Once it was decided that society needed more “lebensraum”. Once it was decided that society needed backyard blast furnaces.

            If you can think of a better idea than “society, democratically” to decide what society needs, I’m open to suggestions. I think that one of the most important JG jobs for JGers would be – think up JG jobs. Their input should be weighted the highest, looked upon most generously by the “higher-ups”. The tombs & furnaces were not such bad ideas, furnaces only being bad because they took away from better ideas. Lebensraum, no. As I’ve said, its easy to design a JG worse than a BIG. I think there should be both. But the JG is far more important, and is less paternalistic, not more. The BIG alone says: the gubmint knows best, and says there is nothing you can do to satisfy your desires. The BIG alone & anything similar has serious problems economically & politically & is not a permanent, universal solution.

            The guy who makes the JG fundamentally necessary is not the state or anyone else, but God, who says you gotta toil by the sweat of your brow for your daily bread. Somebody has to do the work to provide for the BIG recipients. Keeping just one person who can do so and wants to do so from doing it himself is crazy.

            Charity & decency & the wealth of society is what must be behind a BIG for others who can’t do it for themselves. The knowledge that the state is not omniscient, that a BIGer might be doing something stupefyingly important, like making supremely brilliant comments on blogs, which the JG bureaucracy is too dumb to fund as JG work, is another reason for a BIG. But I don’t think that such unsung geniuses should be insulted by the additional filthy JG lucre, which might tempt them out of their garrets.

          3. F. Beard

            In addition to debt forgiveness every 7 years (Deuteronomy 15) the Bible also commands return of agricultural land every 50 years (Leviticus 25). In other words, the agricultural land could not be permanently sold.

            If the 50 year Jubilee was applied to the US then many people could return to their family farms, which in many cases they lost because of our crooked money system.

          4. F. Beard

            But the JG is far more important, and is less paternalistic, not more. Calgacus

            The MMT crowd ignores the fact that little paternalism would be needed if justice was addressed. Where are they on a universal bailout? Where are they on abolishing the counterfeiting cartel? Where are they on abolishing the National Debt (except Bill Mitchell)?

        2. F. Beard

          but there’s this weird fetishism all over the place about how just having “jobs” somehow makes us whole and good. They didn’t leave me a choice

          The Left can’t admit for some reason that credit-creation and other banking privileges such as the National Debt is theft. That leaves them pretty well weaponless when it comes to demanding social justice. So they have to beg the Right for crumbs on pragmatic grounds.

  2. F. Beard

    JG creates jobs for those who want them, then trains workers on the job. Randall Wray

    How does one create a meaningful job? But just give people money (BIG) and they will find their own meaningful work to do. Also some would drift out of the conventional workforce to enjoy a well deserved rest leaving openings for others to drift into the conventional workforce to end their involuntary rest.

    Also a JG ignores that people were dis-employed with their own stolen purchasing power. One does not work for just restitution – one is entitled to it.

    1. jake chase

      FB,

      You’re on the right track with ‘give people money’. If the Fed just sent every taxpayer $100,000 the current depression would be over. But what would happen next? Would MacDonald’s begin charging $50 for hamburgers? Would a pair of Nikes cost $999, a Chevy Priap $97,000? How about electricity? water? oil?. Would the politicians increase their bribe demands, the CEOs their extortion demands?

      I don’t think anyone knows what would happen, but it sure beats giving $27 trillion to the same debt junkies that created this mess, while leaving the indebted population unable to service the debt. Don’t overcomplicate your argument with all this business about counterfeiting. Only 1% of the population understands that banks create money. The other 99% think money is created by government.

      Andrew Jackson said in 1830 (or thereabouts): if the people understood banks there would be a revolution tomorrow morning.

      1. F. Beard

        But what would happen next? Would MacDonald’s begin charging $50 for hamburgers? jake chase

        I would combine the bailout with a ban on further credit creation and meter the bailout to just replace existing credit as it is paid off. That way the total money supply (reserves + remaining credit debt) would remain constant. Of course, if P = MV/Y then decreases in output (Y) or increases in velocity of money (V) could cause prices to rise.

    2. Joe Firestone (LetsGetitDone)

      I believe we should offer both a BIG and a JG at a living wage with good fringe benefits. So, I share some of your perspectives. I think meaningful jobs can defined by locally-based stakeholders including people in the JG program. The Jobs should be defined from the bottom-up.

  3. Tim

    MMT sounds really clever, which means it’s too complicated for the masses to understand which means it’s highly vulnerable to abuse/fraud with a democracy.

    If we want to get rid of kleptocracy we need a system that is not conducive to it. We need a simple system, something similar to a balanced budget, which clearly identifies when, where and how much capital is being re-allocated from those that provide the funding via taxation. Balanced budgets contain functional motivations instead of disfunctional motivations to the general populous. If it’s going to be a democracy there is no other way.

    I’m obviously theorizing here as it’s impossible to get back to square one with our current system.

    1. Mole

      Tim,

      You will quickly find out it is not about justice. its about me me me me.

      How do you figure out which have stole and which one didnt. are all the have nots in that position because they never got a chance or because they chose to?

      MMT cannot answer these because it is not about justice, its about me me.

      Free markets are the answer.

      1. David Brooks

        Where’s an example of this so-called free market you refer to Beavis? The Heritage Foundation’s beloved “Capitalism” depends on ever-growing amounts of state intervention or its survival, and the system is hitting the point where the teat runs dry and all the welfare recipients from private equity firms to CEOs need to face the music, and repent as it were.

        1. Mole

          The US has gone from a freer market to the mess we have today. A quick timeline will show how we went from being wealthy families owining their own homes, cars and savings to a nation of debtors.

          The closest to free markets is Iceland who told banks to shove it and took the pain that came from the irresponsible lending and dorrowing. Iceland has a true recovering economy.

          Not all individuals, groups and corporations are not the same and cannot work the same, are not equally effectove, do not have the same aspirations, the same drive, the same propensity to save, to spend, etc…

          As such, when the government gets involved, you are bound to reward failure (banks), while punishing responsibity and success (savers). Its not a difficult concept, i learnt and all of you have learnt when we made mistakes. We become better humans when we are allowed to take the pain.

          1. Carla

            “The closest to free markets is Iceland who told banks to shove it and took the pain that came from the irresponsible lending and dorrowing. Iceland has a true recovering economy.”

            Actually, Mole, Iceland defaulted. And I agree with you, it was the right thing for them to do. The Icelandic people stood up and said “NO.” We need to learn from them.

            However, your belief in the cleansing value of human suffering makes me wonder if you even read Randall Wray’s post.

            And your nostalgia over the “free market” that supposedly existed in the past betrays you. Article of faith that it may be, that’s all the “free market” is or ever was, because it has never existed in reality on this earth.

            So I humbly suggest that perhaps you would benefit from reading R. Wray’s post again.

          2. Me

            “The US has gone from a freer market to the mess we have today.”

            The US had the highest tariffs in the world for a century and a half. We developed behind protectionism. We have had, since around WWII, the most protectionist agricultural system in the entire world. A good portion of our technology has come out of the state/military. The internet, computers, satellites, civilian aircraft, biotech breakthroughs, cell phone technology, etc. The vaunted middle class was created with top marginal tax rates sometimes above 90%, corporate tax rates that were much higher. We used to have something called the estate tax. Unions were much stronger, and more radical too. This is just a taste of the reality you seem to have missed.

            In recent decades we have massively lowered top marginal tax rates on individuals, corporations, inheritance. We have signed one horrible free trade deal after another. We have gutted New Deal financial reforms. We got rid of our capital controls, price controls. Unions represent a much lower percentage of the workforce than they did decades ago. They used to represent over 1/3 of workers, now they represent about 12%. Currencies are convertable. Beginning in the late 19th century giant, large corporations started dominating markets (which means, according to the definition given by economists, there wasn’t a “free market”. You can’t set prices in a free market. A handful of firms aren’t supposed to have large impacts on prices in markets, since there are so many small competitors) and setting prices. Hasn’t changed much since. On and on.

            So when did we have a “free market”, if you go by the cartoonish definition libertarians use? When we were a much poorer, agrarian economy? When there weren’t many private multi-national corporations? When we had relatively little industry and the British were king? When was this utopia?

            Explain how we were so much more of a “free” economy back in the day. Don’t mention bailouts either. S & L, Latin American Debt Crisis, 1987, East Asian Financial Crisis. Nothing new.

          3. Mole

            @carla,

            No Carla. Iceland not only did the right thing, it did what the market was asking for, a cleansing of bad debt and misallocation of capital.

            You see, when this happens, capital returns to much neede parts of tje economy.

            We are so caught up withthe old and useless that we have lost sight of the better future. Either we accept this truth, or the market will enforce it on us.

          4. Mole

            @me,

            You are suggesting trade barriers are good for consumers?

            I will suggest if you impose tarriffs on items, comsumers will foot the bill. Your wealth will be adversely impacted. The solution is not more barriers, its to remove any remaining. Also, your gov has laws which rewards the offshoring of jobs.

          5. jonboinAR

            Mole:
            Yes, they have been. Consumers are helped by having jobs in factories that haven’t been shipped overseas. Why do you think all of the Asian tigers as well as the awakening dragon keep trade barriers up? They’re somewhat wise, at the least. We are extremely foolish (the mass of Americans)following corrupt, wicked leaders who don’t care in the least to protect our interests.

          6. Me

            “I will suggest if you impose tarriffs on items, comsumers will foot the bill. Your wealth will be adversely impacted.”

            Yes, tariffs have been good for the country and not everything comes down to how cheap things are. As I said, the US was the most protectionist country in the world for a century and a half. Adam Smith said that the states should adopt free trade. We ignored him. If we didn’t we would have been much closer to Egypt or Bangladesh industrially (who had industries that could potentially rival the British. They were smashed by force). That might be a stretch, but we certainly wouldn’t have become the industrial power we did. We could never have competed if we didn’t have such high tariffs. The same is true of Japan, China, India, South Korea, hell, most every country that has developed. Read Ha Joon Chang’s “Kicking Away the Ladder”. No country has developed using “free trade”. The British developed behind protectionism too, for a much longer period of time than the US. Sorry, you are looking at this simplistically and it doesn’t jive with economic history.

            Besides, read Ricardo. In his chapter “On Trade” in his Political Economy and Taxation, he articulated the defense of free trade that is used to this day, in modified form. Comparative advantage. Guess what, he based his argument on the assumption that capital (production) wouldn’t move across borders. He said it was possible but he assumed in his book that capital stayed put, labor and what capital produced is what flowed freely across borders. Once you take that away, totally different ball game.

            Western companies can ship production over borders, which undermines the development of poorer countries. They would only develop if they develop their OWN companies to produce what they want and need. Relying on foreign capital and companies doesn’t help them develop, it stunts their development. It also harms workers in both countries, but especially in the richer countries. Now companies can drive wages down here because of the low wages elsewhere. So companies, many of whom benefited from US tax dollars and support, split for greener pastures. They get workers to produce their products for much cheaper. This can, and usually does, lead to higher profits, reduces wages here and stunts the development of enterprises in the poorer countries.

            Once you take away the idea that capital stays put, “free trade” shows itself to be a horrible scam. Before Obama we have signed 12 free trade deals. All but one, Singapore, has resulted in a worsening trade balance, which means job losses. This is a big factor in the deindustrialization here, the massive increase in wealth and income inequality and the financialization of the economy. Sorry, you have nothing but empty theory.

            Marx did have it right long ago, “While openly preaching free trade in poison. it secretly defends the monopoly of its manufacture. Whenever we look closely into the nature of British free trade, monopoly is pretty generally found to lie at the bottom of its “freedom.”

      2. Ben Wolf

        The core of MMT is about accurately describing how the system works, not about providing rhetoric for disaffected leftists to wage class struggle. You can be a socialist, a keynesian or an austrian and accept MMT’s description of our monetary system. What policies we choose to pursue from there are a different matter.

        1. joebhed

          Ben Wolf:
          “The core of MMT is about accurately describing how the system works,”

          Randy:
          ” We note that no one can pay taxes until government spends currency into existence. And so on. I won’t repeat all the analysis presented in previous blogs.”

          I’ve read Randy’s book and his updated views on “the nature of money”, with which I disagree.
          http://www.levyinstitute.org/pubs/wp_717.pdf

          The FED’s publication on money mechanics says that money (M1)comes into existence when banks make loans.
          Wray, Kelton, etc. say that the Treasury “creates new money” when it makes a payment.

          I say that payment is a flow of the M1 money supply, into and out of the Treasury’s TGA account.

          It is presently incumbent on MMT to clarify – TO ACCURATELY DESCRIBE – whether banks create money(legal-national-unit-of-currency-denominated-bank-credits), or whether the Treasury creates money – as it should.

          Thanks.

          1. Rodger Malcolm Mitchell

            Actually, dollars are created by two methods and destroyed by two methods:

            Dollar creation:
            1. All loans
            2. Federal spending

            Dollar destruction
            1. Pay off of loans
            2. Federal taxes

            Both MMT and Monetary Sovereignty describe these processes in detail.

            Rodger Malcolm Mitchell

          2. EconCCX

            Rodger, can you explain why government borrows, in the trillions, that which it can so easily create and destroy?

            Do you believe that when the FRBNY buys an asset with a book entry, it is the government and taxpayers that own that asset? Or does the asset belong to the owners of the FRBNY?

          3. joebhed

            This is to Rodger
            “Actually, dollars are created by two methods and destroyed by two methods:
            ……..
            Both MMT and Monetary Sovereignty describe these processes in detail.”

            Actually, they don’t.
            Both claim THAT they explain it, and try to explain it, but they do not explain it.

            MMT claims that the purpose of taxation is to reduce the purchasing power of the public.

            HELLO !
            There’s 20 million unemployed needing purchasing power.

            They have no science behind that claim, failing to distinguish cause and effect.

            Sorry.

    2. JEHR

      My dear Tim, if you really want to know how the kleptocrats managed to create the financial crisis and put millions out of work, you would do well to learn about MMT. MMT just explains how monetary things really work and through it you can see how the banks subverted the system. Of course, the ideas are not as simple as you would like and they require a lot of hard work to understand especially if you don’t have an economic background.

      But you will gain real pleasure when you begin to understand the concepts.

      MMT makes more sense than any other economic theory that exists today. Do yourself a favor and try to learn about it.

    3. Joe Firestone (LetsGetitDone)

      It’s too bad you’re only theorizing. perhaps if you were aware of the prevalence of extreme business cycles under the gold standard and balanced budgets you’d have a better understanding of the fact that balanced budgets would be a disaster for everyone except the financial class and the banksters.

  4. F. Beard

    The second comes at the topic of unemployment from the human rights angle: the right to a job is one of the internationally recognized human rights. Randall Wray

    What happens when robots can do all non-creative work? Or should we cease technological progress so that never happens?

    It’s justice that is lacking and we had better find it quick.

    1. Homeless Obama

      Give everyone an annual stipend, most will be magnitudes more productive than in the hellish work camps of corporate detention.

      1. JTFaraday

        It is pretty amazing what the trolls are calling a “human right” these days.

        1. Kunst

          If you don’t have a job (money, income), you can’t sustain your life. Is life a human rigtt? “Certain inalienable rights…life, liberty, and the pursuit of happiness.”

          Alternatively, we can just let enough people starve to balance supply and demand for labor. Every robot means someone has to die.

      1. F. Beard

        Sharing profits would accomplish the same thing but in a more principled manner. The workers’ jobs have been automated away with their own stolen purchasing power. They deserve restitution for theft and the abolition of the means of that theft, credit creation.

        It all goes back to the banks – the means by which the rich steal from the poor.

    2. jonboinAR

      We can continue (Oh, I forgot we haven’t started!) shortening the work week while paying everyone the same amount as before. Then we all benefit from the increasing productivity.

  5. Mole

    This is defintaly better than giving money away. Especially if it means the end of unemployment.

    The only issue i have is that it is still market manipulation and is bound to create dislocations.

    Free markets are my top choice, but at least tax payers would get more bang for their buck. There are tons of roads that need building,cleaning etc..

    1. Carla

      “Free markets are my top choice, but at least tax payers would get more bang for their buck.”

      You’re actually saying “Pure fantasy is my top choice, but …etc.

    2. Joe Firestone (LetsGetitDone)

      Free markets are not an option. They’re unstable and quickly become concentrated. The only question is who will control markets that have become concentrated? My preference is that the public should control these, and that concentrations are continuously broken up. TBTF is TBTE (Too Big To Exist)

  6. Sandwichman

    The thing I don’t get is that to implement JG all we really need is to have a government that is not the servant of a ruling elite that wants to dominate us. Gosh, if we had a benignly paternalistic State, we wouldn’t need a “job guarantee.”

    1. JEHR

      Sandwich, if the private sector was doing its job, it would not be sitting on billions on dollars but would be lending and hiring. When the private sector becomes so enamored of money that that is all they want to deal with, then the public sector must help its citizens. One way to do that is to create an environment that is conducive to creating employment which can be as simple as road building or as complicated as on-the-job training programs and supporting entrepreneurship.

      1. David Brooks

        Hiring hurts profits, less so in right to work states, but still, generally hurts profits unless their’s a big ol’Govmint backstop with 3x the breathin’ human capital’s paycheck. Woo Weee that’s how you gonna done do it! ‘Bomb bomb bomb, bomb bomb Iranistan!’

  7. wilwon3

    @F. Beard

    ‘What happens when robots can do all non-creative work? Or should we cease technological progress so that never happens?

    It’s justice that is lacking and we had better find it quick.’

    I have found many aspects of the modern money concepts enlightening; however, according to Drs Randell Wray and Bill Mitchell, the whole idea in defining MMT (i.e., including the theory involving a JG-jobs guarantee- or ELR-employer of last resort- in the acronym) seems to be related to their contention that the government of a sovereign nation should be concerned with provision of jobs for all citizens who wish to have such. That apparently outrageous claim/stance continues to be contentious, however, the other mechanical aspects involving money creation, banking, and several others (I will not mention) are based on experiences described by a number of insightful economists including Hyman Minsky. (He was Dr Wray’s mentor who worked in at a regional branch of the Federal Reserve and had an appropriate background to understand the bookkeeping/accounting mechanics employed for that aspect of central bank function).

    Anyone interested in further information about MMT could check out Dr Wray’s recent efforts in conducting a ‘MMT primer’ over at the New Economics Perspectives site. I found that educational effort an very useful. As I have no formal education relative to economics, I found Dr Wray’s 1997 book on Modern Money very enlightening. He has a new book on the way later this year which will expand on the topic of MMT. A dozen or so sites are currently focused on arguing and further refining opinions/concepts related to MMT and about the roles which could be taken by responsible governments.

    Obviously, MMT could not actually be realized in anything like our current culture; for starters, the laws for the 1/0.1% are quite different from those for the 99/99.9%. However, a wider understanding of the money creation phenomena explained by modern money discussions would help the general public understand that the ‘deficit hawks’ arguments are based of fantasy fostered by most of our main-stream economists and institutions of learning. The politicians are in positions to exercise power, but they also have little or no understanding of the fundamentals of money creation; they do know how to benefit from the situation and will be unlikely to ever concede their utter ignorance as long as they are fed/nurtured by the opportunistic predators among the 1%.

    1. F. Beard

      I have already read Dr. Wray’s book and have a decent understanding of MMT. My problem is the fanatical adherence to the necessity for jobs – even make-work jobs – when all that is really missing is money so people can pay off their debts to the counterfeiting cartel, the banks.

        1. F. Beard

          Why? Wouldn’t it be a lot less painful and more just to just give everyone,including non-debtors, new fiat? Steve Keen suggests something similar in his “A Modern Jubilee”. Also, it would be a great time to ban so-called “fractional reserves” since the universal bailout would provide the new reserves to allow 100% reserve lending without deflation.

          1. Carla

            “Wouldn’t it be a lot less painful and more just to just give everyone,including non-debtors, new fiat? Steve Keen suggests something similar in his “A Modern Jubilee”.”

            Okay, give everybody money.

            “Also, it would be a great time to ban so-called “fractional reserves” since the universal bailout would provide the new reserves to allow 100% reserve lending without deflation.”

            Great! I agree. And THEN give a paying job to everyone who wants to work. What is the problem? I don’t see the problem.

            Well, I mean, I know, there’s the international banking cartel, but except for them, what’s the problem????

          2. F. Beard

            And THEN give a paying job to everyone who wants to work. What is the problem? Carla

            If you put it that way, not much. But I don’t see the MMT bunch advocating a universal bailout or abolishing credit creation or even abolishing sovereign borrowing which Bill Mitchell calls “corporate welfare”.

          3. Walter Wit Man

            I agree that a Universal Bailout and a Jobs Guarantee are not mutually exclusive.

            Hey, why not do both!

            In fact, I say we do three things at once: a one-time Universal Bailout (say $100,000 to every person), AND a permanent Jobs Guarantee, AND a permanent Minimum Income.

            Let’s also make Unemployment Insurance a one-time, no-fault payment.

      1. Walter Wit Man

        Yeah, why not a guaranteed minimum income for all? How about $15,000?

        Let’s also lower the Social Security full retirement age to 62, and lock the benefits in with a fair COLA. Let’s spend the fund down, and issue all future payments in greenbacks (and not via payment cards owned by banks) and no more payroll tax collected.

        Oh, and socialized medicine or single payer would be nice . . . then we would be moving in the right direction.

        Paid family leave is also an option. Like full wages for one year, or $15,000 for those without a job.

        I would also like to see socialized public schooling, from day care to secondary education. Basically the deal California and so many states originally promised to its citizens almost 50 years ago (minus the day care part, afaik).

        All these things could be paid for with greenbacks.

        Then we can cut the welfare rolls and the wasteful military and police spending. By welfare I mean the subsidies to oil, war, and insurance industries, etc.

        These actions alone would heal so much pain. This is such a basic but awesome deal I can imagine it being immensely popular if it were fairly presented to Americans.

        We are better off promoting goals other than perpetul growth. These actions would open up jobs to those more willing to perform them and the jobs would hopefull pay better.

        Seems like we need to democratize the fruits of OUR dollar.

  8. F. Beard

    But what if government will only issue $1 in return for 1 hour of hard labor? Randall Wray

    So instead of a gold standard we have a labor standard to protect the purchasing power of government money by limiting the amount issued? Suppose you employ the unemployed to dig and fill holes? How does wasted labor protect the purchasing power of money? Would it not be better to just pay the workers and let them find their own work to do?

    The solution to the possible over-issuance of government money is to ensure that government money is de jure and de facto legal tender for government debts ONLY. That way, if government overspends relative to taxation, then ONLY government and its payees would suffer loss of purchasing power assuming everyone else switched to private currencies (for private debts only).

  9. Susan the other

    In nature stability, a stable ecosystem, does not create instability. What is it about our enterprise that creates instability? Too much of a good thing? Where is there an example of “inflation” in nature? I’m just asking because I think we humans are instable from the start, we just don’t recognize it until it reaches a certain threshold. My favorite example is that we produce megatons of garbage and toxic waste and do nothing to offset this debt. Which is beyond inflationary, it’s delusional.

    1. F. Beard

      What is it about our enterprise that creates instability? Susan the other

      Counterf**ting.

      Too much of a good thing? Susan the other

      How much counterf**ting is acceptable?

    2. joebhed

      “In nature stability, a stable ecosystem, does not create instability. What is it about our enterprise that creates instability? ”

      Susan
      I thought you’d never ask.

      http://www.bibocurrency.org/English/Formal Stability Analysis and experiment (final) rev 3.4.pdf

      Formal Stability Analysis of Common
      Lending Practices and Consequences of Chronic
      Currency Devaluation

      Sergio Dominguez and Marc Gauvin

      IMHO, FAR beyond MMT anything….
      Because I know you’re a reader.
      please.

  10. joebhed

    All for the JG here.

    “…….the state then spends the currency into existence, moving resources to the public sector; people then can pay their tax.”

    “To that we can add private sector “money creation” as a leveraging activity. …… We note that no one can pay taxes until government spends currency into existence. And so on. I won’t repeat all the analysis presented in previous blogs.”

    If there is private money creation, why can’t people pay their taxes with that money? Is money different from currency?

    And I thought MMT claimed that taxes do not pay for government services. I guess nobody in government knows that.

    1. F. Beard

      If there is private money creation, why can’t people pay their taxes with that money? joebhed

      Because the Federal Government creates (spends into existence) and destroys (taxes out of existence) reserves – so-called high powered money. Us peons and non-bankers use credit money unless we withdraw actual physical cash.

        1. F. Beard

          When the Federal Government cashes your check for taxes then reserves are transferred from your bank’s account at the Fed to the Federal Government’s account at the Fed.

          If your pension check is from the Federal Government then it is new reserves. As for the distinction between currency and money, I tend to use them interchangeably; maybe some one else can help.

          1. joebhed

            “When the Federal Government cashes your check for taxes then reserves are transferred from your bank’s account at the Fed to the Federal Government’s account at the Fed.”

            I thought the federal government destroyed my tax payments as they are neither necessary for or capable of paying for government services. I must be confusing something.

            The CB only deals with banks requiring ‘reserves’ (in ‘once-upon-a-time theory).
            So, CB payments must be reserves.
            That’s a CB function. OK.

            But why are Treasury payments – like for social security, or even for a toilet seat – considered reserves?

            When I get my social security payment, it is in my checking account and I buy groceries.
            Why is that different from selling my bicycle, depositing the check, and spending that money on groceries?

            Sometimes I feel that the MMT construct of the CB and Treasury being “one-entity” distorts our abilities to understand what is really going on.

            I always thought reserves were a requirement of the central bank for commercial banks that ‘create money’ when they make loans.

            Gotta hold some of that deposit money as reserves with the CB, and lend the rest, etc..

            When banks have money in excess of their requirements for loans and reserves, they call them excess reserves – and they lend them to other banks for their reserves, etc..

          2. Ben Wolf

            Currency can be defined as physical money in circulation. Money is a broader term for the medium of economic exchange, whether paper, metal or electronic. I’ve tried to stop using the term currency altogether as people usually find it confusing.

        2. Mole

          I would not worry about what currency i paid with. you can always exchange dollars for oranges, corn, wheat or a private dollar.

          My concern is that the government money would collapse.

          1. Ben Wolf

            @Joebhed

            When government spends, Treasury employees alter the numbers in bank accounts. The Federal Reserve then dispatches reserves to the recipients’ banks to clear the transactions. The reverse happens when government taxes, the reserves received when you pay your taxes go to electronic oblivion. Spending creates reserves and taxation drains them. The purpose of reserves via the Federal Reserve System is to ensure that checks always clear so that consumers of commercial bank services can always have peace of mind that their money won’t disappear or get caught in limbo. Prior to this banks often didn’t cooperate because they didn’t trust each other and wouldn’t honor the payments, or would often fail to have sufficient reserves on hand, or fail to transfer them in a timely fashion.

      1. Mole

        How would you deal with a scenario where the valuve of private money goes up, say 50% vs government and where government money can only buy half of what it previously did?

    2. Ben Wolf

      Taxes don’t fund spending. Ic you follow the chain of transactions you find that tax revenues go into the government’s “account” and never come out. You find the Treasury altering numbers in other accounts rather than tranferring tax revenues TO those accounts. Taxarion serves to establish the dollar as the legal unit of exchange and to regulate aggregate demand.

      1. joebhed

        Ben Wolf, Thanks.

        “When government spends, Treasury employees alter the numbers in bank accounts. ….. The reverse happens when government taxes, the reserves received when you pay your taxes go to electronic oblivion. Spending creates reserves and taxation drains them.”

        Reserves?

        Treasury statutes require the department to receive tax monies(and others) and to pay for government expenses from those tax monies, using its TGA.

        My tax payments DO go into the Treasury’s TGA and government toilet seats are paid for by payments from the same TGA.

        I am sorry to report that the MMT construct of what happens with double-entry bookkeeping through central bank reserve accounting will NEVER change the FACT that my taxes DO pay for government services; as is required by law.

        MMT needs to figure out WHY that convoluted, nuanced reserve-accounting, bookkeeping malady is so important to state money and the public purpose. And to figure out how to get home without it.

        The statutes say that the government MUST have the money in its account in order to make the payments. Were we to resort to paper currency rather than bank-credit computer monies, there would be no chance for the pluses and minuses to “disappear” my payments.

        Nobody in the real world cares about the nuances of reserve accounting and the impossible construct of how balance flows between two separate agencies that have power over the public’s money system, on the one hand, and the public purse on the other, render my tax payments incapable of paying for government services.

        It will never sell the public on reform.

        Thanks.

      2. Fiver

        What other accounts are “changed” at Treasury, and why alter them at all if the purpose of taxes is to destroy money?

        Elsewhere you state government spending creates reserves. Why, given years of very large deficits, together with much-reduced bank lending since the 2008 bust, are the excess reserves at the Fed not much, much larger?

    3. Calgacus

      Joebhed:If there is private money creation, why can’t people pay their taxes with that money? Is money different from currency?

      But I pay my taxes with credit money, don’t I?
      Is my pension check ‘currency’ or ‘money’?
      Thanks.

      As F Beard explains, you can pay your taxes with your pension check = reserves = currency =government money. Or you can pay with a check drawn on a bank, which could be private money that the bank just created. But the bank can’t pay with a check drawn on itself, can’t clear your payment that way. It has to use currency=reserves=government money.

      F Beard:As for the distinction between currency and money, I tend to use them interchangeably; maybe some one else can help. “Money” here is the most general term. It can mean government money or bank money = bank notes = bank deposits, which “leverage” off of government money because of the privileges of banks. Wray is using “currency” to mean current government money, its usual meaning – which includes reserves, FR notes, coins etc.

      1. joebhed

        Sorry, I can’t pay my taxes with reserves or my pension.
        Reserves are a CB – deposit-based bank media.
        Only cash(locally IRS), check(incl.Cashiers) or EFT from my checking account.
        I can pay with the M1 money in my checking account that comes from my pension, or social security.

        My point is that Randy says that we need ‘currency’ created by the government FIRST in order to pay taxes later.
        I say we do not.
        We pay our taxes with checkbook M1 money.

        What happens is Treasury-Reserve accounting is immaterial.
        And not really explained ANYWHERE.
        Thanks.

        1. Calgacus

          Sorry, I can’t pay my taxes with reserves or my pension.
          Reserves are a CB – deposit-based bank media.
          Only cash (locally IRS), check (incl.Cashiers) or EFT from my checking account.
          I can pay with the M1 money in my checking account that comes from my pension, or social security.
          I meant SS as the “pension check”, of course private pensions are drawn on private banks.

          My point is that Randy says that we need ‘currency’ created by the government FIRST in order to pay taxes later.
          I say we do not.
          The Treasury department, the IRS says you do. They win. They’re right. Randy’s right. You’re wrong. You lose. (Unless you have a perfect counterfeiting press in the basement)

          We pay our taxes with checkbook M1 money.
          Which “leverages” currency/reserves. The bank pays taxes with currency/reserves. All the same as if you got FR notes from bank & paid them directly to the gov.

          What happens is Treasury-Reserve accounting is immaterial. And not really explained ANYWHERE.
          Thanks.
          It’s explained in mind-numbing, soporific detail by the MMTers. And it ends up as being a lot of smoke & mirrors describing something as simple as could be, so simple it repels the mind.

          1. EconCCX

            >>The Treasury department, the IRS says you do. They win. They’re right. Randy’s right. You’re wrong. You lose. (Unless you have a perfect counterfeiting press in the basement) <<

            The epistemology of schoolyard taunts and proud, spectacular ignorance.

            The Federal Reserve System is a private institution that can purchase any asset it desires with its book entry "reserves." Reserves which do NOT come into existence by means of government spending, but by those very book entries. For assets which then become property of the bank, not the US Government.

          2. F. Beard

            Reserves which do NOT come into existence by means of government spending, but by those very book entries. EconCCX

            Right you are! I do admit I forgot that myself.

          3. Calgacus

            Who created the Fed? Whose laws does it operate under? Which came first, the US government or the Fed? Didn’t the US government get along without it for over 100 years? Yes, it can be run corruptly. Wray wrote a blog recently about how he thinks Andrew Jackson might have been right all along. Yes, it can engage in hidden fiscal spending – although it balks at doing so too obviously. Bernanke balked at one request to do so at the height of the crisis.The authority the Fed operates under is the laws of the USA. The power it has comes solely from these laws. You could read the MMTers papers & books & the works of their predecessors and see how you’ve been confused by the smoke & mirrors to become a devotee of the cult of the central bank. Or not.

          4. joebhed

            Please. Be nice.
            Just explain your position. Thanks.

            Please explain where the Treasury department says that IT must first create the money before IT can collect the money in taxes.

            Please explain where the IRS says that the Treasury must FIRST create the money that is used to pay the taxes.

            I’m not interested in how the bank pays taxes.

            I’ve read the “mind-numbing, soporific detail by the MMTers”(Bell-Kelton).

            While it is certainly that, it fails to explain why my M1 tax payments, which end up in the Treasury’s TGA account, do not, and are not capable of, paying for paper clips at Homeland Security, in the M1 account of the paper clip supplier, which are paid for out of the same account.

            Somehow we’re supposed to believe that it’s because of two (-) minuses on balance sheet accounting.
            PUHLEEZ.

            To those of us who BELIEVE the Treasury should be the monopoly currency issuer, it behooves the MMTers to have this discussion sooner rather than later.
            And to explain why it is important.

            Thanks.

  11. tiebie66

    The more I read about MMT, the more disillusioned I become and depressing I find it. But first, let me acknowledge the effort – there is merit in trying. Then, allow me to make a few observations myself on some of the points raised by the author; a cogent critique it is not, but I need to start somewhere.

    “…since government can “afford” full employment, it should ensure it. From the perspective of human rights, unemployment is evidence of a violation of human rights.
    Further, it is the position of MMT that imposition of taxes creates a demand for money—from inception, one with a tax liability but without the means to pay it is in some sense “unemployed”, searching for a way to earn the money needed to pay the tax.”
    This is bizarre – like a physician who breaks a bone in order to set it. So the government first violates the ‘human right’, then sets about to fix it. Why not avoid both? Never mind the human right. So, instead of walking down the hill every day to fetch water and carry it back up, we create an aqueduct and pipe running water right to the kitchen. But now, we have violated someone’s right to work and we have to create a job to compensate for it.
    Something is very wrong with many of our economic concepts.

    “MMT has three levels or aspects: description, theory, and policy.
    As a description there are actually two levels. First we describe a “pure” or “hypothetical” case that applies to any currency issuer.”
    Including Zimbabwe.

    But then we discover:”Since it is “fiat”, government can print up unlimited amounts, give it away free, and drive its value to zero. Zimbabwe here we come!”
    So, the ability of a government to print its own currency and tax it back has really no direct bearing on the economy as it should be. It can happen in the complete absence of an economy (murder, robbery, extortion,…). The intersection with the economy comes from the fact that money are tokens that facilitate bartering, including time shifting. Money cannot ethically be spent into existence because it is not a good or service, but a token. Money stands for, but is not equivalent to, a good or service. Goods and services can be exchanged ethically. Money should be distributed in sufficient quantities to permit effective ‘bartering’. Thus, tokenize goods and services. I do not know how to accomplish this, but the BIG seems to offer a avenue of inquiry.

    “I defined MMT as an integration of several approaches to monetary theory, including Chartalism, Endogenous Money, Monetary Theory of Production, Functional Finance, Sectoral Balances Approach, and Circuit Theory. Personally, I’d also add Minsky’s Financial Instability theory and probably a few other bells and whistles.”
    Utterly depressing! None of them worked, thus putting them all together will somehow work? What are we waiting for? The ship carrying a cargo of ’emergent properties’? Ockham advised against that. Can we not isolate the principles?

    “Money does need backing—….” No, tokens do not need backing. Next, imagine how token creation and distribution can be abused and botched. What compels us to accept the tokens as tokens? I don’t know the answers, but the right questions sometimes help.

    “The threat of unemployment and deprivation is believed to be an essential motivator.”
    Yes, the threat of famine gets the farmer to the field. The ‘economy’ is simply a derivative of this truth. And it produces psychopathy? How? Malnutrition may, but the natural threat of malnutrition? We have evolved to deal with that!

    There, that blunt rant you must now sing about goddess, but fairly.

    1. Mole

      I can suggest an improved MMT.

      Lets call it free MMT.

      End the fed and fractional reserve, letting the market set the value of money and the rate.

      Return to gold standard. These actions return trust to our currency and stop gov fraud.

      The trick is simple. We all want the most efficient markets that are effective, most productive, which improves the lives of our citizens. If we do, then we want ineffiencies removed and efficienies expanded.

      Stop all government interventio in all markets including hoising, education, medicinr. This restores orders to these markets and funelling of funds driving costs higher. Let irresponsible companies and individuald fail.

      implement right to work accross the nation.

      1. Me

        “End the fed and fractional reserve, letting the market set the value of money and the rate”

        Yay! So I guess no credit creation by private banks? How do you end fractional reserve banking without a lot of governmental intervention? Is there a transitional phase you could imagine that can be done using “free market” means? I am giddy at the prospect of another free banking era. Worked out well before, right?

        “Return to gold standard. These actions return trust to our currency and stop gov fraud.”

        For one, we have to deal with ecological and environmental issues that were not around when the gold standard was last in place. It makes no sense, zero, to expand and contract the money supply (and along with it the purchase and consumption of natural resources, pollution, etc) based upon some damn metals. It didn’t work well the first time around either. Read Polanyi’s “The Great Transformation”. He does a great job of explaining what the gold standard was and did an even better job of explaining why it caused such economic chaos. Besides, your ideas were put in place in England after the Bullion debates. Ricardo lost the debate with fellow economists but the government didn’t care and put gold convertability (and austerity) in place. There was one financial crisis after another for decades, the Bank of England had to step in time and time again to bail out the economy and to put lost more money into the system. So how do you stop credit creation, which is responsible for far more inflation worldwide than M0 creation by central banks, without the big, evil government?

        “Stop all government interventio in all markets including hoising, education, medicinr. This restores orders to these markets and funelling of funds driving costs higher.”

        Now you are just getting silly. Is there any evidence what so ever that privatization leads to lower damn costs? Has the privatization of California’s educational system reduced costs for students? Health care? Were pensions in Chile run more efficiently after their privatization? Of course not, it was and is a disaster which is why polls in Chile today show that upwards of 3/4’s of the country want the pension system in state hands.

        I am getting a little tired of your type of mentality. Austrian and neoclassical economists, or whatever, say that the “free market” will lower costs. People as far back as John Bates Clark said that regular prices were “no profit prices”. Competition would reduce the costs people paid for goods and services down to the point that firms couldn’t even make profits. That is how wonderful the “free market” is!

        Look at the concentration of ownership in the financial sector. Look at the ratio of prices to unit labor costs. Shortly after WWII that ratio was about 1.5, it is now at 1.75. The oligopolistic markup pricing is not supposed to be possible though. I thought normal prices were no profit prices. Could it be that the theories you believe in have no basis in reality?

        It seems that people attatch themselves to ideologies whose theories rest on certain assumptions. The assumptions are usually absurd, they conflict with reality. When the believers in these religions are confronted with the fact that reality doesn’t match up with the assumptions of the theories they almost always ditch reality and dig the hole deeper.

        1. EconCCX

          @Me
          Your insights in this thread show an impressive level of understanding. Would you think about adjusting your ID to a derivation that can be searched in the archives? Thanks for considering.

          1. EconCCX

            Thanks, I did try that. Lots of results; difficult to identify any from our friend. The parser performs a colonostomy: “Me says:” returns “Trust me says:”, “Just me says:” and “The cynical side of me says”.

          2. Calgacus

            “Me says:” -“just -me -says:” -“in -me -says” -“to-me -says” -“trust-me -says” -“hold-me -says” site:www.nakedcapitalism.com

            gets a decent number, mostly from him, might eliminate some though

          3. EconCCX

            At that level of complexity, I think we’ve easily justified the original suggestion. To anyone putting all that thought and expertise into their comments: Your objective is to influence the global debate. Make your ID searchable.

      2. F. Beard

        Return to gold standard. These actions return trust to our currency and stop gov fraud. Mole

        Baloney. A gold standard rewards hoarding and that is NOT good for an economy or its money.

        1. Calgacus

          A gold standard can be good for a country. If it has a lot of gold and is surrounded by suckers that it can sell the worthless gold to for their intrinsically valuable fiat money & the imports it can get with this money. Gold is just a ridiculously overvalued, useless commodity. The best way to understand a lot of economics is as a con game, the biggest big con their ever was.

    2. Ben Wolf

      If you’re asking what compels us to accept the tokens then you haven’t been readiing enough, because that’s at the core of MMT and the State Theory of money.

      We accept the state’s tokens because it taxes us in them, which forces us to go out and work to acquire the state’s tokens to satisfy our tax liabilities. This creates base demand for the token and requires the state spend money into the economy before it can tax us.

      1. joebhed

        @Ben Wolf

        “We accept the state’s tokens because it taxes us in them, which forces us to go out and work to acquire the state’s tokens to satisfy our tax liabilities. This creates base demand for the token and requires the state spend money into the economy before it can tax us.”

        Definition of CONVOLUTION
        1: a form or shape that is folded in curved or tortuous windings
        2: a complication or intricacy of form, design, or structure

        I too loved the Buckaroo construct.
        But UMKC lacks sovereignty and legal tender statutes.

        The reason that the people accept and use the national currency has nothing to do with paying taxes.

        It has to do with the very real fact that it allows them to buy and sell their goods and services in a medium that preserves, to whatever degree possible, the stability of that purchasing power over time.

        MMT convolutes Knapp’s state-money theory by turning to Innes to define money as a unit-of-account. An account requires a credit and a debit, therefore money MUST BE DEBT.

        The posture of tooooooo many MMTists that theey have discovered the meaning-of-money-life is rather audacious.

        It is one construct. I suggest that readers interested in alternative ways of thinking about how to implement Knapp’s state-money review the works of noted political economist and and author Alexander del Mar.
        s
        All that anyone needs to understand is that there iknow ihing as a national monetary system in a monetarily sovereign nation.

        1. joebhed

          Sorry, my computer just hiccupped that into existence.
          I’ll just refer to del Mar’s History of Monetary Systems and The Science of Money as well as his writings on The Theory of Value.

          In a national monetary system, there is no need to view money as a unit of debt. It is a unit of money. It becomes a unit of debt in commerce.

    3. ChrisPacific

      Zimbabwe here we come!

      I really wish people would just stop invoking Zimbabwe and the spectre of hyperinflation without backing it up or explaining why it’s applicable in the particular situation they are discussing. It wouldn’t be so bad if it was just blog commenters doing it, but I see the same kind of thing from economists in the press all the time.

      Ed Harrison’s posts on the subject on this blog from a year or so back are some of the best summaries I’ve read of hyperinflation and why it happens. Most commonly it seems to result from a collapse in productivity coupled with large debt repayments denominated in a foreign currency. It’s a kind of economic division by zero. It is NOT an inevitable consequence of currency creation by a sovereign government, which happens all the time.

      Money cannot ethically be spent into existence because it is not a good or service, but a token.

      Why can’t it be ethical if it’s done by the government which is the single issuer of the currency? Granted it’s a form of wealth redistribution, but government is already in the business of wealth redistribution – why should this form be better or worse ethically than any other?

      1. F. Beard

        Good point. Also, common stock is an ethical private money form that IS spent into existence.

  12. Me

    Michal Kalecki talked about the power that capitalists had within industry and within society at large. He said that the left tended to focus entirely on the profit motive, which was and is understandable. However, he said that capitalists were also concerned with power. They might chose to not use a productive technique, even if it increased profits, if it lead to a loss of power vs the workers. The same could be said with society at large. One thing that the rich, the 1% or whatever, have over workers is that they have the power over their lives. Without the capitalists providing jobs workers can’t pay bills, pay off debt, go to college, etc. This gives them lots of power. If the government steps in and provides jobs, that lessens the power that capitalists have over workers. It isn’t just about crowing out private investment, in situations like these there is no investment in jobs or capital by capitalists, so the government either steps in to provide that or it comes from nowhere.

    The capitalists would probably oppose this, even though it could increase the demand for their products, because it lessens their power in society. That is one of the reasons why it SHOULD happen if you ask me.

  13. EconCCX

    Wray: “(Treasury writes checks on its account at the Central Bank, which is not permitted to buy Treasury bonds. And so on.)”

    Did he just say that the Central Bank is not permitted to buy Treasury Bonds?

    Here’s an article about the Federal Reserve’s annual contribution to the Treasury, which is merely forgiveness of the interest on Treasury bonds in its portfolio.

    http://www.nytimes.com/2012/01/11/business/economy/fed-returns-77-billion-in-profits-to-treasury.html

    The article makes it clear that the Federal Reserve is a for-profit corporation in the private banking system, operating under some legal constraints and a small public component in its governance.

    A Federal Reserve Note is, like every bank note, a promissory note. It is a promise by the issuer to offer Treasury coins, constitutional money, in exchange. Thus the Treasury earns seigniorage only on the coins, hence the attempt to earn an income from commemorative quarters and dollar coins.

    The point is that the Federal Government does NOT create money by spending or destroy it by taxation. The Federal Reserve Bank needs to possess only a tiny amount of government coin to be able to make good on its promise to exchange the coin for the note. The Bank creates reserves through book entries, no government spending required. And it may buy metals and securities with its money power, none of which then belongs to the taxpayers or the nominal government.

    The USG -could- indeed sell a trillion dollar coin to the Federal Reserve System for that much credit to its current account. But it doesn’t own the bank, which is a private player as well as scorekeeper.

    Carl Herman seeks the Job Guarantee and supports public investment, while understanding that Treasury doesn’t spend money into existence; the private banking system lends it in. Wray describes how the system SHOULD work; Herman, Zarlenga, Ellen Brown write about how it actually does.

    http://www.examiner.com/article/federal-reserve-can-serve-100-not-just-criminal-1-prof-tim-canova-explains

    http://www.washingtonsblog.com/2012/02/federal-reserve-national-debt-nearly-defeated-during-great-depression-lets-finish-the-job.html

    Folks, please don’t conflate money reform and MMT. The difference is in the factual grounding, not the political or economic objectives.

  14. Nathanael

    All true, Randy, but you’ve just conceded the key point of your critics. Did you notice?

    The Job Guarantee cures the “problem” of involuntary unemployment. This is a minor and unimportant problem, compared to the problem of poverty — most people would prefer to be rich and pursuing their hobbies rather than being “employed”.

    Therefore the Basic Income Guarantee, which cures the problem of poverty, is clearly more important and should be implemented first. The secondary problem of people with the quixotic desire to “have jobs”, rather than pursuing their hobbies, can then be dealt with by the Jobs Guarantee.

    Agree? Your own logic compels you to agree.

    1. Calgacus

      No, Wray has it right, though imho he expresses himself infelicitously in some places. Involuntary unemployment is the disease. Poverty is the symptom. By far the most important cause of poverty is the disease of involuntary employment created by an insane State, that impoverishes us all so that the 1% can be relatively bigger fish in a smaller pond.

      BIG – been there, done that. Doesn’t work. Can’t work. Inflationary, politically unstable. JG, full employment has worked always & everywhere it has been even half-way tried. Once you have the JG, the trivial portion of poverty caused otherwise is easy to take care of by a richer society’s BIG.

      1. F. Beard

        Doesn’t work. Can’t work. Inflationary, Calgacus

        You neglect that work can be negative. A large public sector can impede the private sector by, say, regulating it to near death. That is inflationary because it destroys real output. In many cases it is better to just get out of the way.

        politically unstable. Calgacus

        Meaningless work is far more destabilizing (and demoralizing), I’d bet. The problem may be that in addition to a BIG, adequate resources such as land may be needed too. “40 acres and a BIG”?

        1. F. Beard

          That’s not to say that government should not spend generously on infrastructure; it should. Teachers should be so well paid that competition for teaching positions is intense.

        2. Calgacus

          You’re right that it is possible to design a bad JG that would be worse than a BIG or nothing at all. “Murderer” should not be a JG job. So of course, that is historically the most popular one, the military as a JG. Basically, have a better JG than that & all the problems will solve themself. The JG will not lead to a gigantic government sector. The idea that it will be bigger than the unemployed reserve army of labor, that it will be more inflationary than that, is unbelievable.

      2. casino implosion

        Wray does express himself most infelicitously, to the great detriment of his cause.

        I met him not too long ago, and expressed my appreciation for his efforts, but mentioned that his expository style could use a lot of work. I said that Cullen Rohe at PragCap was a good model for clear, thorough explanation of the concepts. Dr. Wray shot me what seemed at the time an oddly hostile look. Now that I understand a bit more about the internecine battles in MMT, of which this NC post is one salvo, the hostile look is explained.

        1. Calgacus

          Personally, I found MMT unintelligible until I read a sentence in the old paper by Kalecki that Bill Mitchell likes. I still find the old guys, Mitchell-Innes, Lerner, Commons (undercited by MMTers, even though Keynes said he was the closest to his thought), Boulding, Keynes, Kalecki often easier and more enlightening reading. But I understand Wray’s reaction. I think MMT expositions & drifts err in the opposite direction to what Roche does – their arguments are stronger, better & simpler than they think they are, they just need more organization and structure and more brutal in-your-faceness against modern garbage. They should try to out-Lerner Lerner’s bluntness and clarity.

  15. dcblogger

    by raising aggregate demand, a Basic Garanteed Income would greatly reduce unemployment. Anything that got money into the hands of the poorest of the poor would reduce unemployment, but a job garantee would get rid of unemployment and all its attendant ills.

    In addition to a job guarantee I would like to see an extensive public works program. For example, repairing crumbling bridges, that needs to be done by skilled workers who won’t work for minimum wage, but in addition to preventing bridge collapse, it would help the economy.

  16. Hugh

    Leaving aside that vaccinations do not cure diseases, they prevent them and would have no effect on those who have contracted the disease or reverse damage associated with an infection, and similarly leaving aside that polio is a single strand RNA virus and so antibiotics would have no effect on it, although they might be used in some cases against secondary opportunistic infections, Wray dodges the issue of minimum wage vs. living wage for a jobs guarantee. His bufferstock terminology which I truly detest applied to people leads me to think he veers more toward the minimum wage side.

    The distinction between minimum and living wage is important. A jobs guarantee that pays a minimum wage creates precisely what Wray calls a “bufferstock” of workers used to low wages available to work in the private sector for only slightly better low wages. In other words, a jobs guarantee with a minimum wage puts downward pressure on wages in the private sector. Employers can keep wages low because they have a source of workers who are acclimated to low wages against whom employers can force their regular employees to compete. In effect, the bufferstock concept comes across as a business subsidy providing a pool of cheap labor with at least some basic job skills.

    A jobs guarantee that pays a living wage puts the focus where it should be, on the person, the worker. It not only gives the worker the means to support him/her self, but it places upward pressure on wages (and benefits) in the private sector because employers have to compete for workers who already have a viable alternative. A shade better than rock bottom won’t cut it.

    I should point out that Joe Firestone is someone who does support a jobs guarantee with a living wage.

    1. H. Alexander Ivey

      Thank you sir for taking the time to point out Prof Wray’s poor understanding of medicine – saved me the time, much appreciated! – and for looking deeper into his argument. Minimum wage vs living wage, excellent point!

    2. Calgacus

      Wray & all the other MMTers support “A jobs guarantee that pays a living wage”. That this living wage, the JG wage will be, must be to all intents & purposes the minimum wage is a truth of logic, not something which can be changed by a different design.

      One can debate what the precise dollar value should be in current conditions, but that is something different.

      1. Hugh

        Nice illustration of the constantly moving target that is MMT. But your explanation doesn’t wash. Wray finds time to expatiate upon some half-assed buckybucks experiment at his university but fails to mention a living wage? Something which should be a critical part of any jobs guarantee and which I have in fact seen debated in the MMT community.

        So on the one hand, Wray uses a loaded term like buffer stock, which commodifies workers, and on this we are supposed to give him a pass, I don’t know, just because, and not attach any of its neoliberal associations to it. On the other, we are supposed to assume facts not in evidence that Wray favors a living wage although he does not see fit to mention it and uses terms like buffer stock which militate against the idea that he does, in fact, favor it.

        This just comes across as terribly slippery. I don’t know if you can accept this or not but it is a prime reason why MMTers make so many of us uneasy. They are so busy being defensive that, with one or two exceptions, it is functionally impossible to get an MMTer to entertain any alternate views, accept any criticism, or engage in any kind of debate.

        1. Calgacus

          Hugh, there is no slippery target here. The accusation is simply false. The fact is in evidence. Prominently. Read Wray’s book for instance.

          It is not anybody’s responsibility to say everything you want them to say in every paper they write. This is simply impossible. All the academic MMTers & Mosler forthrightly support a living wage JG. Everybody’s definition is different, everybody’s dollar value might be different. Your own definition might change from day to day. But on principles there is no disagreement, and no disagreement with you.

    1. Hugh

      Not necessarily. Another dimension left out of the discussion is the psychological one. Most peope feel good about being productive. They have more self-respect and confidence. They feel more a part of and participant in society. Just because we can’t quantify these doesn’t mean they don’t exist and aren’t important. I suppose it comes down to this. We can either expect the best or the worst from each other. I think most people are amazingly receptive to having the best expected from them. For one thing, it tells them that we think they have a best, and that in itself can be heartening.

  17. Hugh

    An ongoing criticism of MMT is that its practitioners are dreadful at explaining it. It also presents something of a moving target because, as Wray more or less admits, there are as many MMTs as there are practitioners. Every MMTer has their customized version of it. So that if you criticize MMT in general, you are told you need to look at X’s customized version. And if you are criticize X’s customized version, you are referred back to the general MMT model.

    Re taxation mentioned in some of the comments, in the context, taxation is not needed for spending purposes. It is needed to establish and enforce a value to the currency. These are separate functions. Looking beyond MMT, the purposes of spending and taxation are essentially to redistribute resources within society. This redistribution can be not only for things like infrastructure and national defense but also for eliminating poverty and extreme wealth inequality. It can also be used to neutralize the problem of interest by taxing it away from creditors and spending it back to borrowers. I say can because these things are not being done. We have both increasing poverty and truly mammoth wealth inequality. At the same time, interest is not being recycled to borrowers meaning that they, as in the 99%, are having their aggregate wealth eroded away from them in interest payments.

    1. tiebie66

      The idea that tokens have to be spent into existence, rather than be distributed appropriately into existence, troubles me. This amounts to counterfeiting. On top of that, taxation is used to enforce acceptance of said counterfeiting. Two wrongs. Also, as you point out, redistribution of resources relies not on MMT.

      Perhaps MMTrs are dreadful at explaining MMT because it is conceptually dreadful to begin with. MMT is a disappointment so far.

      1. Lambert Strether Post author

        I keep hearing “counterfeiting” repeated over and over in this threads. How exactly does can the monopoly issuer of a currency be a counterfeiter?

        And why do I get the feeling you’d never be anything less than “disappointed” in MMT? Pretty good post, I thought. But then I did read it.

        1. EconCCX

          Lambert, which entity do you consider the monopoly issuer? The US Government, which sells the coins? Or the Federal Reserve System, owned by constituent banks, which issues the legal tender promissory notes? Have you heard that there’s been a bit of controversy about why a supposedly sovereign government must indebt itself to a private bank for the issuance and use of money?

          http://www.positivemoney.org.uk/how-banks-create-money/proof-that-banks-create-money/

          http://www.positivemoney.org.uk/how-banks-create-money/money-destroyed-when-loans-repaid/

          1. Ben Wolf

            Banks are ALLOWED to temporarily add to the money supply by leveraging government money. It is a priviledge whch can be revoked, modified or restricted at any time. The Federal Reserve is one-half of the Treasury Department and that’s all. There’s a reason Geithner and Bernanke have breakfast together every morning: neither half of the department can conduct critical functions without close coordination with the other.

          2. EconCCX

            Ben, you will not find any source that says that the Federal Reserve System is part of the Treasury Department. The Federal Reserve System is a privately owned Central Bank owned by its member banks. There is a small public component in its policy making, of which Bernanke is a part; but the taxpayer does not own Federal Reserve assets or share its profits. The Treasury is refunded only the *interest* on Treasury Bills (aka bonds) owned by the Federal Reserve System.

            Entries in “Washington’s Blog” used to be picked up regularly in NC. In fact, NC is where I first discovered that blog. “George” gets it.

            The Federal Reserve ADMITS that Its 12 Banks Are PRIVATE – Not Government – Entities
            http://georgewashington2.blogspot.com/2011/07/federal-reserve-admits-that-its-12.html

            Folks, if facts are in dispute, try to source your claims them rather than merely assert them.

          3. EconCCX

            >>So, to answer a question with a question, what does this have to do with counterfeiting?

            I haven’t used the term, and don’t defend it. Our system of money is privately owned; our money is created by a multiplicity of entities which have every right to do so under current law. And among which our “sovereign” government is a bit player.

            So: I keep hearing “monopoly issuer of currency” repeated over and over in this threads, and ask you again: Which entity do you consider the monopolist?

            To understand our system, you should know that, at the time the Federal Reserve was created, the US Government had debts in gold which it could not pay without going hat in hand to the banking system. Hence its ultimate surrender of monetary sovereignty to private corporate entities. The MMT strategy of taking the USG deeper into debt to create liquidity will only bid up asset values and create a Minsky dynamic of borrower confidence that will only lead to deeper private debt.

          4. skippy

            @EconCCX

            Now theres the fly[s in the pudding. Whom is the authority, whom owns it, what is / are the domestic and international conseqences of any action.

            Skippy… My kingdom! Wastes… for an accurate definition. BTW does – will – always win the day?

        2. F. Beard

          How exactly does can the monopoly issuer of a currency be a counterfeiter? Lambert Strether

          Because government money is legal tender (de jure, directly and indirectly) for private debts in addition to its proper role as the only legal tender for government debts. If genuine private money alternatives were allowed for private debts only then the government would cease to be a “counterf**ter” of private money.

          In addition, the Federal Government enables the banking system to counterf**t via credit creation.

          1. skippy

            “In addition, the Federal Government enables the banking system to counterf**t via credit creation.”…. beardo

            To falsify, deceive, or defraud. A copy or imitation of something that is intended to be taken as authentic and genuine in order to deceive another.

            A counterfeit coin is one that may pass for a genuine coin and may include a lower denomination coin altered so that it may pass as a higher denomination coin.

            West’s Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

            Skip here… WTF are you talking about beardo.

          2. JTFaraday

            Beard, if you’re going to use the term “counterfeit money,” stop muddying the waters with all this utopian private currency yaya.

            The reason we have “counterfeit money” is that private banks –abusing their federal government privileges– created it when they made mass loans they knew would never be paid, on fraudulent terms, and passed the fraudulent bilge off into the economy (in order to pay themselves, while leaving everyone else with the ensuing, much larger mess).

            In turn, the Fed stuffed the ensuing institutional hole with specially created money that could just as readily be called “counterfeit,” because without the original counterfeit, this new (ostensibly) money-good money wouldn’t have been created.

            Full stop.

            The further, disturbing implication to the MMT fan-boyz, is that to the extent people are calling this monetary system “MMT” then MMT is fraud.

            (And MMT-ers do like to say they are merely “describing the system we have today as opposed to the one the textbooks say we have.”)

            So, if you care about this counterfeiting point, don’t confuse the matter further with your own competing private currencies system which doesn’t exist, (unless we want to get together and trade seashells and say we brought it into existence).

          3. F. Beard

            WTF are you talking about beardo. skippy

            “Credit” spends just like real money. It is equivalent to a counterf**ter lending, instead of spending, his “product” into circulation.

            But credit is worse than conventional counterfeiting since the “money” must be paid back with interest that does not even exist in aggregate. So the interest must be borrowed too or else created by government deficit spending.

          4. F. Beard

            The reason we have “counterfeit money” is that private banks –abusing their federal government privileges– created it when they made mass loans they knew would never be paid, JTFaraday

            Even “prudent” credit creation is (legal) counterf**ting since it steals purchasing power from non-borrowers and the less “credit worthy” and lends it (for interest that does not even exist in aggregate) to borrowers and the more “credit worthy”.

          5. skippy

            See above sic @JTfaraday.

            Skippy… in addtion, your need for a dictionary is profound.

          6. F. Beard

            It is your need to quit making distinctions without a difference that is more profound.

            The essence of counterfeiting is stealing of purchasing power. That is what banks do. Thus the banks are essentially counterfeiters.

          7. JTFaraday

            “Even “prudent” credit creation is (legal) counterf**ting since it steals purchasing power from non-borrowers and the less “credit worthy””

            Okay, well. The MMT-ers at UM-KC– whom a few of us have pointed out are insufficiently critical of the current outright kleptocracy to the point of seeming to espouse kleptocracy– don’t seem to have a big problem with credit money creation by private banks even though it has become a global economy destroying problem.

            Given this orientation, when you go for the inflation point– which in comparison to a system that has proven itself to be kleptocratic (or people “starving to death” because they were “automated out of a private sector job” or whatever)– you are making a comparatively minor point and you just start to look like one of those dread Austrians who aren’t keeping up with a changing reality and they shut you off completely.

          8. F. Beard

            you are making a comparatively minor point and you just start to look like one of those dread Austrians JTFaraday

            What kind of Austrian:

            Hates the gold standard?
            Hates deflation?
            Hates usury?
            Proposes a universal bailout till all private credit debt is paid off?
            Advocates inexpensive fiat for government money?
            Advocates the use of common stock as private money to “share” wealth and power?

            Still, the Austrians get a couple of things right that Keynesians and the MMT folk are blind to. Generally though, I hate the Austrians since they condemn (correctly) the system as unjust but offer no just restitution! Instead they call for a Depression to “purge the malinvestments”. If only the purging would start with their jobs and businesses!

          9. skippy

            “The essence of counterfeiting is stealing of purchasing power.”… beardo.

            Did you read the legal definition, would you go before a court of law and argue based on that aboration of thought?

            Here it is again see:

            “To falsify, deceive, or defraud. A copy or imitation of something that is intended to be taken as authentic and genuine in order to deceive another.”

            Where the hell is stealing purchasing power?

            BTW that statment is incoherent as it could only exsit as a personal value judgment.

            Do you understand that 99.9% of economic discussion is just the extension of a philosophical debate, which started with the of first act of forced participation in antiquity. AKA we make this shit up as we go? Yet you constantly act like any of it is empirical fact.

            Skippy… you are completly fked in the head, seriously. Freemarket utopians shezzz.

          10. F. Beard

            “…A copy or imitation of something that is intended to be taken as authentic and genuine in order to deceive another.” skippy

            That’s what banks do – they issue multiple claims in the form of bank deposits they create (“loans create deposits”) ON THE SAME RESERVES. That’s fraud. The extra claims are thus counterfeit.

          11. skippy

            “…A copy or imitation of something that is intended to be taken as authentic and genuine in order to deceive another.” skippy

            Skip here… You need to study, a bit, of law.

            “authentic and genuine”

            AUTHENTIC. This term signifies an original of which there is no doubt.

            See also: accurate, actual, authentic, bona fide, convincing, de facto, direct, documentary, factual, faithful, forthright, honest, ingenuous, legitimate, natural, original, prime, real, realistic, reliable, rightful, sterling, substantial, true, unadulterated, undistorted, veridical

            Burton’s Legal Thesaurus, 4E. Copyright © 2007 by William C. Burton. Used with permission of The McGraw-Hill Companies, Inc.

            Associated concepts: genuine issue: A factual issue is ‘genuine’ if it is not capable of being conclusively foreclosed by reference to undisputed facts. Although there may be genuine disputes over certain facts, a fact is ‘material’ when its existence facilitates the resolution of an issue in the case. Material facts tend to prove or disprove a disputed fact that is relevant to the outcome in a case.

            Skip here… Where are your material facts? WHERE is your material evidence.

            Do you know what the term Conjecture means see:

            Conjecture refers to a guess work. In the legal context, conjecture is a judgment based upon incomplete evidence. “A conjecture is defined as an explanation that, although consistent with the facts in evidence, is not deducible from them as a reasonable inference.” Banner Lumber Co. v. Ind. Lumbermen’s Mut. Ins. Co., 2009 U.S. Dist. LEXIS 98177 ( E.D. Mich. Oct. 22, 2009)

            Skippy… Hence my constant reminding, if the apparatus of State is not occupyed, by enough people, with a will to change things… nothing will. That is how the game is played, the other option is civil war.

            PS. Hay I share Ray Bradbury dream, but, its just a dream. Where no where close to that kind of cooperation, yet.

          12. F. Beard

            Hence my constant reminding, if the apparatus of State is not occupyed, by enough people, with a will to change things… nothing will. skippy

            Things will change – they have to. When they do, it will be important that sound principles are followed to minimize suffering.

            As for me studying the law, the law has failed wrt banking; it was tricked into legitimizing what is essentially counterfeiting.

          13. skippy

            No one was tricked, although, not – everyone – was consulted either. Republic with voting rights thingy, at least at the start and for a bit.

            “That which is hateful to you, do not do to your friend. That is the whole Torah; the rest is commentary – go and study it.”… Hillel the Elder

            Skippy… disloctions are a bitch… eh.

          14. F. Beard

            “That which is hateful to you, do not do to your friend. That is the whole Torah; the rest is commentary – go and study it.”… Hillel the Elder skippy

            Wow! What an ignorant statement!

            Here’s some correction from the Lord Himself:

            But when the Pharisees heard that Jesus had silenced the Sadducees, they gathered themselves together. One of them, a lawyer, asked Him a question, testing Him, “Teacher, which is the great commandment in the Law?” And He said to him, “ ‘ You shall love the Lord your God with all your heart, and with all your soul, and with all your mind.’ This is the great and foremost commandment. The second is like it, ‘ You shall love your neighbor as yourself.’ On these two commandments depend the whole Law and the Prophets.” Matthew 22:34-40 New American Standard Bible (NASB)

            Hillel, btw, created a way to get around the debt forgiveness ordered in Deuteronomy 15 called Prozbol to protect creditors. Your kind of guy, skippy?

          15. F. Beard

            Hillel thus violated this:

            “If there is a poor man with you, one of your brothers, in any of your towns in your land which the Lord your God is giving you, you shall not harden your heart, nor close your hand from your poor brother; but you shall freely open your hand to him, and shall generously lend him sufficient for his need in whatever he lacks. Beware that there is no base thought in your heart, saying, ‘ The seventh year, the year of remission, is near,’ and your eye is hostile toward your poor brother, and you give him nothing; then he may cry to the Lord against you, and it will be a sin in you. You shall generously give to him, and your heart shall not be grieved when you give to him, because for this thing the Lord your God will bless you in all your work and in all your undertakings. Deuteronomy 15:7-10 New American Standard Bible (NASB) [emphasis added]

          16. skippy

            HEADPOP…

            It was one Quote about treating – each – other – well… and your head explodes…. shezz.

            Anyway… the 4 sects…. Conflicts between the Pharisees and the Sadducees took place in the context of much broader and longstanding social and religious conflicts among Jews dating back to the Babylonian captivity and exacerbated by the Roman conquest. One conflict was class, between the wealthy and the poor, as the Sadducees included mainly the priestly and aristocratic families.[4] Another conflict was cultural, between those who favored Hellenization and those who resisted it. A third was juridico-religious, between those who emphasized the importance of the Second Temple with its cultic rites and services, and those who emphasized the importance of other Mosaic laws and prophetic values. A fourth point of conflict, specifically religious, involved different interpretations of the Torah and how to apply it to current Jewish life, with the Sadducees recognizing only the Written Torah and rejecting doctrines such as the Oral Torah and the Resurrection of the Dead.

            http://en.wikipedia.org/wiki/Pharisees

            Early Christianity is generally considered as Christianity before 325. The New Testament’s Book of Acts and Epistle to the Galatians records that the first Christian community was centered in Jerusalem and its leaders included Peter, James, and John.[1]

            The very first Christians (the Twelve Apostles and the 120 Disciples at Pentecost, etc), were all Jews or Jewish proselytes, either by birth or conversion, referred to by historians as the Jewish Christians. Paul of Tarsus, after his conversion, claimed the title of “Apostle to the Gentiles”. Paul’s influence on Christian thinking is said to be more significant than any other New Testament writer.[2] By the end of the 1st century, Christianity began to be recognized internally and externally as a separate religion from Rabbinic Judaism which itself was refined and developed further in the centuries after the destruction of the Second Jerusalem Temple.

            As shown by the numerous quotations in the New Testament books and other Christian writings of the 1st centuries, early Christians generally used and revered the Jewish Bible as Scripture, mostly in the Greek (Septuagint) or Aramaic (Targum) translations. As the New Testament canon developed, the Letters of Paul, the Canonical Gospels and various other works were also recognized as scripture to be read in church. Paul’s letters, especially Romans, established a theology based on Christ rather than on the Mosaic Law, but most Christian denominations today still consider the “moral prescriptions” of the Mosaic Law, such as the Ten Commandments, Great Commandment, and Golden Rule, to be relevant. Early Christians demonstrated a wide range of beliefs and practices, many of which were later rejected as heretical.

            Maybe you will read a bit of history which is grounded in fact, not limited to a specific region, and not just one books conjecture, the longest extension of hearsay, constantly revised, this world has known.

            http://en.wikipedia.org/wiki/Early_Christianity

            Skip here… But as you say, one only needs to read the one (only your one IMO), repetitively and long enough, and all will be revealed. That’s called conditioning beardo, an exercise of institutionalism and I’m down with Illich on the counterproductivity of institutionalization, amongst many other blaring inconsistency’s, hence the endless in house debate.

            And if you have not noticed, Econned draws the distinction that economics is a religious debate, conducted by economist priests. The same fk’en debate the 4 sects were engaged in, in my book. The oven of thought, a place where cognitive exercise goes – too off its self, brain cells slowly die, before a spark sets off the final explosion ie the planet can’t take it any more and gives us the flick.

            Pharisees and the Sadducees? Democrats vs. Republicans? Until the window shifts in the debate and both are back in the temple of neoliberalism… cough… priests extracting rents just for themselves… again, all whilst they masticate on the proper way to run the market tithe racket, and anyone that has a problem with it… is a heretic?

            Mean while jesus and mob are running around the backwoods laying hands, using synthetic derivatives too feed people, informing the simple folks that the money is property of the priesthood or other elites (Rome) and the best they can hope for is… to give everything – to them – save establish a direct line to gawd via prayer? And that will sustain them until their final demise?

            Hay… at the pearly gates, do they ask you if you have a rewards card?

            Extra credit*: 1. How Should One Choose Between Different Religions?

            Right at the outset, one is faced with a huge number of possible candidates for belief. To which religion should one pin one’s faith? To which should one commit one’s life here and now, and perhaps in the hereafter? Christianity, Judaism, Islam, Buddhism, Hinduism, Confucianism, or Taoism, perhaps?

            The list of options does not stop there, of course. No religion is without its schisms and its sects. Settle on a major religion–Christianity, for instance–and the question still remains: Which version? Roman Catholic, Greek Orthodox, Russian Orthodox, or Protestant? Suppose you settle on Protestantism. Then the question arises: Do you accept the gospel according to the Anglicans, the Unitarians, the Methodists, the Presbyterians, the Baptists, or the Pentecostals? Shall you embrace the “truth” as purveyed by faith healers such as Peter Popoff, whose “messages from the angels” were exposed as clandestine radio broadcasts from a trailer into the tiny hearing aid in his left ear, or the truth purveyed by White House evangelists such as Franklin Graham (son of Billy Graham)? (Franklin Graham made the doctrinal source of the neoconservative war in Iraq explicit when he claimed: “We’re not attacking Islam but Islam has attacked us. The God of Islam is not the same God. He’s not the Son of God of the Christian or Judeo-Christian faith. It’s a different God, and I believe it is a very evil and wicked religion.” Likewise, Lt. General William “Jerry” Boykin boasted about his victory over a Somali warlord, “I knew my God was bigger than his. I knew that my God was a real god and his was an idol.”)

            Nor should one ignore less well-established religion, such as Baha’i, Theosophy, Jehovah’s Witness, Christian Science, or the Church of Latter-day Saints. Or newer, first-generation religions such as the Unification Church, Krishna Consciousness, the Church of Scientology, the Divine Light Mission, the Urantia Foundation, and the Rajneesh Foundation. Well over 500 cults are presently active in North America alone. Why should not the truth lie with one or other of them?

            Or with one of the older, now-forgotten religions? H. L. Mencken’s essay “Memorial Service”[1] lists 138 gods, each of whom was “of the highest standing and dignity … worshipped and believed in by millions.” All, he points out, “were theoretically omnipotent, omniscient, and immortal. And all are dead.” Yet all these gods, and all the religions established in their names, were once potent forces in the lives of their devotees, satisfying what Bertrand Russell called “the cruel thirst for worship.”[2] They were gods able to command devotion and sacrifice; gods in whose names temples were built, heretics were persecuted, and wars were fought. How can we be sure that one of these gods will not come again to reveal himself as the one and only true god?

            Can anyone, with justified confidence, suppose that the circumstances of his or her own birth, upbringing, or subsequent inquiries, are uniquely privileged so as to yield the correct view as to which of these gods, if any, really exists?

            For those who are tradition-bound or otherwise blinkered in their beliefs, the question is easily answered: Don’t get caught up in what the nineteenth century American philosopher William James called “the snarling logicality” of trying to decide between rival options. Consider only that religion which is a “live option” for you–the religion of your fathers, or that of your peers–and bet your life on the possibility that it should turn out to be true. Otherwise, James argues, one might forfeit one’s sole chance in life of “getting on the winning side.”[3]

            http://www.infidels.org/library/modern/raymond_bradley/rivalry.html

            Skippy… Cue beardo to supply one verse out of:

            TOTAL 1189 Chapters 31,103 verses +137* unnumbered

            Old Testament 929 “” 23,145 “” +137* “”

            New Testament 260 “” 7958 “”

            To enforce his unique and unassailable view points, gained from antiquity and handed down from the historical elites them selves.

            Crap… Thread… amends, what is Money, its creation and death. Ummm… livestock et al, stinks up the joint (elites hate the stench these days), mineral commodity’s are subject to fashion (relevance in their usage) require large facility’s for storage and manufacturing (eats into pure profits, overhead), toils direct ownership – slaves, are prone to violent out bursts (elites, get served some of their own treatment -, raped, mutilated, die), etc… soooo… could it be, that it is – a means to liquify all the property’s inherent above – too facilitate the accumulation of wealth and power – with exchanges being the bottle neck for extraction.

            Sorry for the over simplification, its been an evolution thingy and its ongoing – see computational effects. But the premise of this evolution is the same methinks. What would Del Mar think today? Would he still have the same thoughts, as an observer*, after so much time and change?

            PS.. is their anyone to swing with in this joint, as I”m a wild and crazy guy?

            http://www.youtube.com/watch?v=jH9sAENQNV8&feature=related

          17. F. Beard

            It was one Quote about treating – each – other – well… skippy

            Go back and read it again. It is only a negative version of the Golden Rule and limited to friends at that! So basically he is saying “Don’t do things you hate to your friends”. What about everyone else? Plus he leaves out loving God. Plus he (falsely) says that is what the Torah teaches.

          18. skippy

            He was asked to stand on one foot and reveal the truth of the cannons… duh.

            He is popularly known as the author of two sayings: “If I am not for myself, who will be for me? And when I am for myself, what am ‘I’?” And “If not now, when?”[2] and the expression of the ethic of reciprocity, or “Golden Rule”: “That which is hateful to you, do not do to your fellow. That is the whole Torah; the rest is the explanation; go and learn.”[3]

            “As Hillel the Elder had stated, whosoever destroys a soul, it is considered as if he destroyed an entire world. And whosoever that saves a life, it is considered as if he saved an entire world.” [4] ‘Olam’ can alternatively be translated ‘infinity’ or ‘world’.[5]

            Hillel lived in Jerusalem during the time of King Herod and the Roman Emperor Augustus. In the Midrash compilation Sifre (Deut. 357), the periods of Hillel’s life are made parallel to those in the life of Moses. Both lived 120 years (Deut. 34:7), and at the age of forty Hillel went to the Land of Israel; forty years he spent in study; and the last third of his life he was the spiritual head of the Jewish people. A biographical sketch can be constructed; that Hillel went to Jerusalem in the prime of his life and attained a great age. His activity of forty years likely covered the period of 30 BCE to 10 CE.

            Skippy… seemingly, you only know, what you know, and that is good enough. Have you stopped learning?

          19. skippy

            @beardo…. Inconceivable… a thread where you – do not try – too have the last word.

            The fact that you cannot identify the author of the ‘Golden Rule’ (a foundation statement), who was one of the most pivotal figures in Judaic – early Christianity, shows how uninformed you really are…. shezzzz.

            Beardo….Hillel thus violated this: Deuteronomy 15:7-10… the law concerning cancellation of debts in the Sabbatical year

            ——-

            Whatever Hillel’s position, his authority was sufficient to introduce those decrees handed down in his name. The most famous of his enactments was the Pruzbul, (προσβολή), an institution that, in spite of the law concerning cancellation of debts in the Sabbatical year (Deut. xv) ensured the repayment of loans. The motive for this institution was the “repair of the world”, i.e., of the social order, because this legal innovation protected both the creditor against the loss of his property, and the needy against being refused the loan of money for fear of loss.

            ————

            The saying of Hillel that introduces the collection of his maxims in the Mishnaic treatise Pirkei Avoth mentions Aaron HaKohen (the high priest) as the great model to be imitated in his love of peace, in his love of man, and in his leading mankind to a knowledge of the Law (Pirkei Avoth 1:12).

            In mentioning these characteristics, which the Haggadah attributes to Moses’ brother, Hillel stated his own prominent virtues. He considered “love of man” the kernel of Jewish teaching.

            The comparative response to the challenge of a Gentile who asked that the Torah be explained to him while he stood on one foot, illustrates the character differences between Shammai and Hillel. Shammai dismissed the man. Hillel chided the man for his behavior, but in a constructive way: “What is hateful to you, do not do to your fellow: this is the whole Torah; the rest is the explanation; go and learn” (Shab. 31a). Hillel recognized brotherly love as the fundamental principle of Jewish moral law. (Lev. xix. 18).

            From the doctrine of man’s likeness to God, Hillel deduced man’s duty to care for his own body. According to Midrash Leviticus rabbah he said “As in a theater and circus the statues of the king must be kept clean by him to whom they have been entrusted, so the bathing of the body is a duty of man, who was created in the image of the almighty King of the world.” In this work, Hillel calls his soul a guest upon earth, toward which he must fulfill the duties of charity.

            In Avot, Hillel stated “If I am not for myself, who will be? And when I am for myself, what am ‘I’? And if not now, when?” The third part contains the admonition to postpone no duty, the same admonition he gave with reference to study (Avot 2:4): “Say not, ‘When I have free time I shall study’; for you may perhaps never have any free time.”

            The precept that one should not separate oneself from the community, Hillel paraphrases, with reference to Eccl. iii. 4, in the following saying (Tosef., Ber. ii.): “Appear neither naked nor clothed, neither sitting nor standing, neither laughing nor weeping.” Man should not appear different from others in his outward deportment; he should always regard himself as a part of the whole, thereby showing that love of man Hillel taught. The feeling of love for one’s neighbor shows itself also in his exhortation (Avot ii. 4).

            Hillel’s awareness of his own insufficiency is expressed in the following maxim: “Don’t trust yourself until the day you die.” How far his love of man went may be seen from an example that shows that benevolence must be given with regard to the needs of the poor. Thus, Hillel provided to a man of good family who became poor, a riding horse, in order that he not be deprived of his customary physical exercise, and a slave, that he might be served (Tosef., Peah, iv. 10; Ket. 67b.

            ——————–

            Hillel’s disciples are generally called the “House of Hillel”, in contrast to Shammai’s disciples, the “House of Shammai”. Their controversies concern all branches of the Jewish law. Only a few decisions have been handed down under Hillel’s name; but there can be no doubt that much of the oldest anonymous traditional literature was due directly to him or to the teachings of his masters. The fixation of the norms of the Midrash and of halakhic Scripture exposition was first made by Hillel, in the “seven rules of Hillel,” which, as is told in one source, he applied on the day on which he overcame the Benei Betheira (Tosef., Sanh. vii., toward the end; Sifra, Introduction, end; Ab. R. N. xxxvii.). On these seven rules rest the thirteen of R. Ishmael; they were epoch-making for the systematic development of the ancient Scripture exposition.

            http://en.wikipedia.org/wiki/Hillel_the_Elder

            Skip here… conversely to Hillel, there was Shammai. It is said of him and his…

            Shammai’s school of thought became known as the House of Shammai (Hebrew: Beth Shammai‎), as Hillel’s was known as the House of Hillel (Beit Hillel). After Menahem the Essene had resigned the office of Av Beit Din (or vice-president) of the Sanhedrin, Shammai was elected to it, Hillel being at the time president. After Hillel died, circa 20 CE, Shammai took his place as president but no vice-president from the minority was elected so that the school of Shammai attained complete ascendancy, during which Shammai passed “18 ordinances” in conformity with his ideas. The Talmud states that when he passed one of the ordinances, contrary to the opinion of Hillel, the day “was as grievous to Israel as the day when the [golden] calf was made” (Shabbat, 17a). The exact content of the ordinances is not known, but they seem to have been designed to strengthen Jewish identity by insisting on stringent separation between Jews and gentiles, an approach that was regarded as divisive and misanthropic by Shammai’s opponents.

            Hillel’s grandson Gamaliel succeeded to the position of president after Shammai in the year 30, but the Sanhedrin would remain dominated by the house of Shammai until around 70 (see Council of Jamnia). A “voice from heaven” is said to have nullified the legality of the rulings of the house of Shammai (Yerushalmi Berakhot, 1:7), which is why Rabbinical Judaism follows Hillel.

            Shammai took an active part in the political and religious complications of his native land. Of an irascible temperament, he seemed to lack some of the tireless patience which is said to have distinguished Hillel[citation needed]. Once, when a gentile came to him and asked to be converted to Judaism (or Noahite monotheism as H. Falk argues) upon conditions which Shammai held to be impossible, he drove the applicant away; whereas Hillel succeeded in converting him (Shabbat, 31a).

            http://en.wikipedia.org/wiki/Shammai

            ———

            Skip here…

            Any way beardo, it seems that as a christian[?] – you – on one hand – claim to be beholden only to the New testament and on the other, cherry pick from the Old testament, that’s called data mining. Which is a dishonest act IMO.

            Skippy… “Plus he (falsely) says that is what the Torah teaches.”… beardo. Skip here… Doesn’t grok the Golden Rule… when he is the author…. AAAAAHAHAHAHAHAHA!!!~~~~~~~~~~~~~~~

            You have be shown to be the charlatan – that you – are and a false prophet to boot. You dissed Hillel!

            PS… see why economics goes wrong so often, its just religious opinion, a religious debate, the house of Hillel against the house of Shammai thingy. A completely metaphysical construct that is constantly shifting on the sands it rests. All while the world burns… sigh.

            PS. Do you know why the Easter Islanders cut down all their trees and wasted the land? Their religion – told them – too… shezz. In all the religions I have encountered or studied, the only ones that provided long term survival, for its believers, are those that worship the mother that bore them, this world.

            PSS… I find most religions don’t worship gods, they worship man him self (women get the shaft more than not, more killing of the mother thingy) by Gawdhead proxy. Ergo man sets him self up as the center of the Universe, ultimate tall poppy syndrome, what could go wrong!

      2. Ben Wolf

        Counterfeiting is a specific crime; it is illegal. A sovereign government is fully authorized to create and destroy net financial assets as it sees fit. To call that counterfeiting is nonsensical.

        1. Ben Wolf

          @EconCCX

          1). Ownership in a regional bank is nothing like ownership of a publicly traded corporation. If you look deeper than a single claim by Bloomberg you’ll find that for yourself.

          2). You have repeatedly confused public and private debt in your comments.

          3). The gold standard is and was the surrender of monetary sovereignty.

          4). There is nothing private banks can or can’t do to push the Unitrd States government into debt because it cannot be in debt so long as it operates in the USD.

          1. Ben Wolf

            @EconCCX

            Notice how everything you’ve written is infected with political rhetoric. Nowhere is there an effort to understand how the central bank operates without reference to some vast conspiracy. The result is at the end we don’t know any more about our monetary system than we did when your first started writing, all we know are your personal political views. It’s a waste of time.

          2. EconCCX

            @Ben Wolf
            “The reverse happens when government taxes, the reserves received when you pay your taxes go to electronic oblivion.”

            So you think there’s some kind of charade going on at budget time to match expense to income and go out and borrow the rest?

            But I’m the conspiracist. Money creation as I’ve described it is as described in my Samuelson high school textbook, and in this description by Anna Schwartz, co-author with Milton Friedman of “A Monetary History of the United States.”

            http://www.econlib.org/library/Enc/MoneySupply.html

            Notice that she says the Federal Reserve buys the coins at face value from the Treasury, not the notes. Notice she says the Federal Reserve increases or decreases reserves by buying or selling US Treasury securities, i.e. debt.

            I’m describing things the textbook way, whereas your depiction is merely a statement of personal belief.

          3. skippy

            With respect.

            2. Have private and public debt become commingled[?], baliouts et al. What is the effect of derivites on sovereign wealth and debt values.

            3. This statment is in conflict with #4

            4. Tarp, Zirp, Talf, accounting changes, etc. If the FIRE sector owns the government ie revolving door, bribes, idelogical capture, vote funding, et al, whats the point in drawing distinctions any more? As an academic exsersise the FGov can’t go broke, too its self, but, what what the neighbours think.

            Skippy… so MMT, too me, describes a singularity in isolation, although, not the objects around it and their relationship[s.

          4. Calgacus

            4). There is nothing private banks can or can’t do to push the United States government into debt because it cannot be in debt so long as it operates in the USD. Very, very wrong, as I said as “Some Guy” down at billyblog. As long as the US government operates in the USD, it is always in debt. Money is and always was and always will be debt. Read Mitchell-Innes, read Mitchell-Innes, read Mitchell-Innes.

          5. joebhed

            @ Ben Wolf
            “3). The gold standard is and was the surrender of monetary sovereignty.”

            Wow. You must be one of those MMTers who think that our national monetary system became sovereign in 1971.

            So, to be clear.

            This country gained its monetary sovereignty after a hard-fought war fought by American patriots against the greatest power on earth – the power that was presently stealing that sovereignty from the Colonies.

            The United States of America was founded upon a struggle for monetary sovereignty; it is,was and always will be monetarily sovereign.

            So, let’s be clear about that.

            Adopting the gold standard was an act of monetary sovereignty.
            Abolishing the gold standard was another act of monetary sovereignty.

            In the first, the nation gave up a measure of its monetary autonomy and economic independence.
            In the latter, they were regained.

            So, to be clear, the gold standard was not the surrender of sovereignty.

            It will be as monetary sovereigns that we take back, and restore to the public, the issuing power of the national circulating media.

            We would like the MMTers to join us.
            Thanks.

          6. Calgacus

            Joe, you’re right about monetary sovereignty. The important date was 200+ years ago, not 1971. But realizing this, realizing that having a pretend-gold-standard (= government running a we-buy-and-sell gold shoppe) doesn’t change essential monetary sovereignty, how can one hold the position that governments running a bond-shoppe changes anything. All it does is mail dollar bills to people who already have some. All it does is exchange one kind of its money (bonds, wet-ink dollar bills) for another (currency, dry-ink dollar bills). Big deal. Or how can private banks change anything of the absolutely fundamental nature that you realize has persisted for 200 years. Nobody but you can put yourself into debt. (Exception-taxes) Nobody but the government can put itself into debt. No exception. Taxes MUST be paid with government money, government debt, just as if they had to be paid in gold coins. If you think otherwise, you are making gigantic conceptual or accounting mistakes.

          7. skippy

            @Calgacus, and others.

            Are the selling of sovereign bonds et al, on the open market, to all entity’s – public or private, a partial or hole surrendering of monetary sovereign status?

            ICSID

            Abstract:
            In recent years, sovereign debt crises have received much attention from the perspective of international public policy, but an effective legal solution to sovereign defaults has yet to coalesce within international law. Over the last two decades, private creditors have increasingly resorted to litigation in national courts, though without great success, in an effort to obtain payment on defaulted sovereign debt. Another, emerging option is arbitration – in particular, before the International Centre for Settlement of Investment Disputes (ICSID). Will ICSID be the new venue of choice for recovering on sovereign bonds? The conclusion reached here is that attempts to take defaulting countries to ICSID arbitration are unlikely to succeed.

            http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1566482

            Goldmann: Sovereign Debt Crises as Triggers of Armed Conflict: Restructuring Under Chapter VII of the UN Charter?

            Recently, a growing amount of data suggests that there is an intricate relationship between sovereign debt and civil unrest. This article proposes that the powers of the UN Security Council, and in particular its experience with the imposition of sanctions, should be used in order to restructure sovereign debt before a situation aggravates and leads to the outbreak of civil unrest or an armed conflict. The proposal entails some intricate legal questions. First, it requires a reconsideration of Article 39 of the UN Charter, the threshold for the power of the Security Council to adopt binding resolutions. Second, conflicts of competence might arise between the Security Council and the International Monetary Fund (IMF). Third, the rights of the holders of sovereign bonds need to be respected.

            http://ilreports.blogspot.com.au/2011/11/goldmann-sovereign-debt-crises-as.html

            Who is the “Sovereign” in Sovereign Debt: Reinterpreting the Rule – of – law framework from the early twentieth century respective. Odette Lienau

            http://www.yale.edu/yjil/PDFs/vol_33/Lienau%20Final.pdf

            Skippy… they are contracts subject to International Law are they not? The consequences are – agreed upon restitution or conflict – yes?

          8. Calgacus

            Are the selling of sovereign bonds et al, on the open market, to all entity’s – public or private, a partial or hole surrendering of monetary sovereign status?

            If they are denominated in your own currency, not in the slightest. Your own currency is a sovereign bond.

            If they are denominated in a foreign currency, they can become unpayable. The debt can become infinite measured in your own currency. It is almost always an utterly insane, destructive idea, which is why the IMF pushes it so much. It can destroy your economy. Default can be & very frequently is, inevitable. That’s the IMF game plan – debt peonage – Kwitny’s 1986? Endless Enemies quotes an IMFer or World Banker, I forget which, saying exactly that to him.

            Goldmann says The proposal entails some intricate legal questions. Yes, it appears that some want to study the intricate legal question of how we can have the Security Council get away with murder, against one of the most important purposes of the constitution under which it operates, the UN Charter.

            One of the greatest claims of the USA to honor in the postwar era was its role in the UN Charter & its express, considered & forthright rejection of gunboat diplomacy of a creditor nation against a debtor nation. Some scumbag thugs want to twist the SC into a tool of oppression & predation against the unanimous heartfelt agreement of its founders in a far saner time.

            The UN Charter outlaws the “or conflict” in your “agreed upon restitution or conflict”. Recent practice in the SC tends towards – the law is whatever we, the SC, led by the King Thug, the USA, says it is. Of course original intent & legal opinion disagree, the SC has only the powers the Charter grants it, which do not include acting against one of the most important purposes of the charter – no war for sovereign debts. Things like that will never go the ICJ, the natural place, because it is not so corrupted as yet. That’s why the scum have to invent & use inferior fake tribunals for their vile designs.

            BTW, I wrote the Wikipedia article on the guy who wrote the UN Charter. A Russian-American economist nobody ever heard of. Stephen Schlessinger’s Act of Creation is a fine, readable source on the Charter & its adoption & purposes.

          9. skippy

            @Calgacus,

            Reply appreciated. Funny how the US would not pay its bills (UN), back in the day.

            Skippy… look forward to reading your article… and all the related works I’ll need to grok it all. Damn you!

          10. enouf

            2). You have repeatedly confused public and private debt in your comments.–Ben Wolf

            Actually, (with respect) *you* are guilty of said indictment much further upthread;

            Ben Wolf says;
            When government spends, Treasury employees alter the numbers in bank accounts. The Federal Reserve then dispatches reserves to the recipients’ banks to clear the transactions. The reverse happens when government taxes, the reserves received when you pay your taxes go to electronic oblivion. Spending creates reserves and taxation drains them. The purpose of reserves via the Federal Reserve System is to ensure that checks always clear so that consumers of commercial bank services can always have peace of mind that their money won’t disappear or get caught in limbo. Prior to this banks often didn’t cooperate because they didn’t trust each other and wouldn’t honor the payments, or would often fail to have sufficient reserves on hand, or fail to transfer them in a timely fashion.“–Ben Wolf

            If that isn’t a clear interchanging Public for Private, and vice-versa throughout (Money/Currency/Debt/Funding), i don’t know what would be.

            You start out with Gov. spending (Public), then somehow jump into Commercial Banks (which fund Private Enterprise) …

            Also, with respect to this comment;
            …Spending creates reserves and taxation drains them–Ben Wolf
            Reserves? (i think joebhed also asked about this). Reserves of What? There needs to be Assets to have “reserves” — One cannot simply create Assets out of thin air, like we allow our lovely Counterfeiting Cartel to do (The Fed)…and then they have the nerve to call Debt an Asset! Gah!..

            If you would like to walk this conversation down the “USA’s Natural Resources and Earners’ potential in the future, etc” as Collateral, sure; we can discuss that–but i will go ballistic for sure then–since we also allow ourselves to be A%%raped by those same Global Transnational Financial Terrorist Corps of Gypsies that destroy entire Ecologies (Beholden and Loyal to *no* Nation/State, only to themselves).

            Love

        2. enouf

          Actually, a Government can never be considered Sovereign, since it’s only a Legal Fiction Entity, created by the real Sovereigns, the individuals that inhabit–The People of the Land.

          Love

    2. H. Alexander Ivey

      At the risk of sounding like a British backbencher – which I am not, either one – Hear, Hear! Well said sir!

    3. Fiver

      Hugh,

      Curious what you’d suggest was a “living wage” in today’s terms, and how many times that amount the highest individual remuneration would be, could be, or should be. MMT’ers seemingly accept money’s existing ranking/status/power properties be retained, with Wray actually citing that quintessential elite technocrat, i.e. Keynes, who like Obama favoured just “moving on” and allowing the finance psychotics to keep playing their money games because, we’re told, these ranked the least socially dangerous.

  18. Greg Taylor

    I’ve become too skeptical of macroeconomic analyses to take its recommendations very seriously. Like other macro analyses, Wray’s arguments sound great until you start looking at the microeconomic implications. The jobs guaranteed by democratic governments are unlikely to be the skilled infrastructure building jobs that add value to society envisioned by Wray. The most politically feasible and easiest jobs to create would expand the military/industrial complex; perhaps “enhance” the police/incarceration state and other activities that don’t threaten the private sector. Those with such guaranteed jobs and the society they are trying to serve would almost certainly be better off without JGs.

    There’s no reason to expect that government would use its JG resources in a socially productive way. There’s certainly less incentive to do so than there would be in the private sector – at least the part of industry not dependent on government contracts or guarantees. Psychopaths are just as likely to control the public JG labor pool as they are in private industry or on Wall Street. They can easily create public sector jobs that destroy social fabric – and many are arguably doing just that even without JG labor.

    In the end, MMTers will need to convince people that government can be trusted and won’t abuse its powers and ruin people’s lives by engaging in unnecessary war, incarcerating minor offenders, enabling corporate malfeasance or other destructive activities. History is not on their side.

    1. Hugh

      I think the model for the jobs guarantee is the jobs programs of the New Deal. They weren’t all about building industrial infrastructure: rural electrification, roads, dams, levees, and bridges. They were also about building public buildings and building up the federal parks. And they went into other areas as well. There were artists projects and writers projects. Artists decorated public spaces with murals and other art. Writers collected a lot of the nation’s oral history and traditions before these faded away. Photographers documented who we were and what we were doing, both the good and the bad.

      In other words, it was never pure Keynesian increase of aggregate demand. Policymakers considered both job seekers’ qualifications and also what needed to be done, and they tried to match the two. I’m not saying it was perfect, but everyone’s work and qualifications were considered valuable. We too have many things that need to be done in healthcare, education, research, energy conservation, updating and replacing old infrastructure, rethinking community development (both to make it more energy efficient and fit the needs of people, not developers), and more generally in the reindustrialization of the country along sustainable lines.

      I also think that none of this will get done until there is a mass movement that ordinary Americans feel invested in that controls government so that when Americans look at government they see it not as something alien or abstract but as the expression of the movement, which is to say themselves. I worry that such a movement may not come at all or that, if it does, it will not be until conditions are much worse.

      1. JTFaraday

        I don’t think the model is the new deal. I think the model is the punitive model of the 1980s-90s workfare attempt to strip out the welfare state, actualized in Clinton and Gingrich’s bipartisan welfare reform bill.

        We see this, for example, in the insistence that the “job guarantee” must replace traditional unemployment insurance program, in their insistenve that it only pay minimum wage regardless of the work being done, in their conservative trash talking the even very basic job and reporting skills of the unemployed– even though we know that all kinds of people are unemployed, particularly in the current downturn– among other things.

        We see in the fact that they do not have a full complement of policy ideas geared to generating full employment, but only this one idea, which many of us think is designed to drive the rest of the job market lower.

        We see it in their utter disregard of the issue of underemployment. They have no concept that people may be underutilized, underpaid, and psychologically ruined and deskilled by the whole process of doing shit work for shit pay, day in and day out.

        This is just off the top of my head.

        To me, the “job guarantee” as constructed by the “MMT-ers” at UM-KC is designed to facilitate neoliberal monetary and trade policies by using the power of the government to provide an essentially poverty level employment mechanism that shuts up the political discord around “jobs” (and your sacred human right to labor in the fields of global neoliberal capitalism), enabling exploitative practices to continue as long as possible.

        This is not a good faith effort, and I am surprised that anyone thinks it is. But, it does seem to me that most of those who do think it is, are of the punitive persuasion I mentioned above. Someone might be getting something for nothing– 2 years of AFDC or 6 months of unemployment insurance, let’s say– and that is not something to be tolerated.

        1. JTFaraday

          Even this so-called response is not a good faith effort. It is an imperious, snarky, condescending (and poorly written) non-response to people who have put WAY too much time into this already.

        2. Leverage

          Some fair criticism, that’s why these programs should be voluntary and shouldn’t remove the current scheme and shouldn’t serve as other forms of labour protection.

          Basically it would be a true employer of last resort program after every other option is gone. So you can decide between two JG programs: a) the prison-military-police JG program as it currently exist; b) or an alternative non-violent JG program built by local government institutions which have to do with local community services (for example).

      2. Greg Taylor

        Hugh has some nice optimistic thoughts on the possibilities for JG implementation. It might be worth trying some small scale community-based JG efforts. I have serious reservations but would be open minded on the results.

        Everyone wants or needs to make a contribution to society but it doesn’t have to be though a job. The “unemployment disease” Wray alludes to conflates the necessary contributions with the optional jobs. The contributions must be significant in your own mind and will depend to some extent on the respect or prestige others bestow on them. I wonder whether JG program contributions would satisfy these needs. Many private sector jobs don’t. I’m not sure Wray has identified the right disease to treat.

        New Deal programs depended heavily on manual labor – good matches for the skills of the unemployed at the time. Pairing today’s job-seeker skills to JG-programs would be much more difficult today – far fewer of today’s unemployed are healthy, experienced, and interested enough for useful manual labor.

        Who assesses the skills available and designs beneficial JG programs? Are local and state governments up to the task? Problems in healthcare, education, research, energy conservation, infrastructure, and community development exist in my city of 200K but I can’t see how the resources of 10,000 or so in a $150M/yr JG program could be marshaled to address them.

        If JG programs could be designed to help these folks find meaningful work enhancing communities, they’d enjoy widespread support. I’d love to see it happen but replicating the New Deal in today’s society just isn’t in the cards. People’s skills are more specialized and work requires more specialists. Figuring out how to work with the abilities the unemployed possess and build appropriate skills would need to be approached on an individual basis. You couldn’t assume the bulk of the unemployed could effectively work at manual labor. Maybe ideas would pop up in the communities but I see overwhelming challenges.

        In any event, the political argument for JG won’t be won on a macro level – at least for me. I won’t be convinced until I see evidence that JG addresses the real needs of people in actual communities.

    2. Leverage

      You have hit the nail on the head: There already exists a JG scheme, the military-police-(economically-created-crime)-prison complex. Either you oppose both or it only makes sense to add an other non-violent JG (even if you don’t share the obsession with jobs, personally I don’t).

      Is just a logical conclusion. Off course it should be voluntary, no one should be forced to take it (except for things like food stamps and other entitlements), that’s how government can’t abuse it, there is ample practical experience in designing these programs which had ample social acceptance and are very easy to oversee, because contrary to other programs (like covert ops, prisons and police repression) the users are the own population, not the elites.

      What scares capital is some one could bid labour offering better conditions than private market forcing to pay better salaries or give better conditions for low paying works.

      It’s not perfect but certainly is better than current situation. Preferring the current situation to that one is non-sense.

  19. JP Hochbaum

    In one of the comments I saw the mention of using BIG to eliminate poverty. But a JG could eliminate poverty and help to assure higher dollar valuation. It could do both tasks, something a BIG can’t claim to do.

    1. F. Beard

      It could do both tasks, something a BIG can’t claim to do. JP Hochbaum

      Obviously, you have never considered that work can be negative.

  20. Kunst

    It all boils down to people and power. If you have JG, what kind of jobs and who manages them? Presumably you still have an un-JG economy to provide all the non-JG goods and services, which will result in wealth being distributed unequally. Some of your JG workers will use their money responsibly, some will not. What do you do when Mr. JG can’t pay his rent or bills? BIG sounds nice, but to this cynical realist, the two most constant human characteristics are selfishness and laziness. Given guaranteed sufficient income, many people would not choose to work on something meaningful. How meaningful are all the jobs required to keep my grocery store stocked with food? Communism sounded so lovely and idealistic: from each according to his ability, from each according to his need. It failed miserably because it simply doesn’t correspond to human nature. MMT/JG sounds great in theory but I suspect would be equally ineffective in this real world we inhabit. I’d love for it to work, but I’m not convinced. That said, some kind of JG is preferable to having people sit at home watching TV, supported by their unemployment or welfare checks. Maybe there is some middle ground between income without work and let the unemployed die.

    1. Joe Rebholz

      “…to this cynical realist, the two most constant human characteristics are selfishness and laziness.”

      The amount of selfishness and the amount of laziness each is not constant in any individual over time and each is not constant over individuals in groups. The amount of selfishness and the amount of laziness in an individual at any time depends on that individual’s development up to that time and is a function of many things such as upbringing and environment. Between groups selfishness and laziness vary from group to group and culture to culture.

      “Human nature” is not fixed. It is always changing, evolving. To think human nature is fixed and unchanging is not realistic.

    2. enouf

      … two most constant human characteristics are selfishness and laziness. …

      Yep, and all the TBTFs ; and all their apparatus and minions are the most selfish, laziest band of gypsies the world has ever seen. They not only are;

      – not useful
      – accomplish nothing socially beneficial

      but they are Felons, Traitors, Treasonous, Counterfeiters and they steal wealth from Sovereigns every nanosecond! So .. rather than being neutral to overall societal benefit; those *most* laziest, and *most* selfish are allowed to destroy this planet to every sovereign’s detriment.

      Love

  21. Kevin de Bruxelles

    Once again we have an MMT post that ignores all the real problems. The US has plenty of aggregate demand; there is no need to increase it. The problem is that US citizens are unable to capture enough of this demand in the form of jobs. That is because the US lacks sovereignty over trade and borders. Capitalism will always seek the cheapest labor, a government is in place to limit the capitalism’s access to cheap labour through among other things citizenship and trade controls. The problem is that many first world countries have bought into the open borders and free trade insanity which allows companies to avoid local labor and environmental laws by offshoring to third world countries. And when this is not possible these same companies inshore cheap and powerless illegal infiltrator third world labor to replace relatively expensive and empowered local citizen labor.

    Of course MMT refuses to mention any of this. They even refuse to answer whether the JG would apply only to US citizens or whether illegal immigrants would also have access to these jobs. If so then far from helping, a JG would only serve as a magnet for the third world poor to come to the US for a guaranteed job.

    The problem is that MMT self identifies as a “Leftist” movement while its core principle, monetary sovereignty, is more of a Nationalistic outlook. In fact for MMT to actually work, only a Nationalist politician, like for example Marine Le Pen, could implement it because it would only work if border and trade sovereignty are bundled together with currency sovereignty to form a proper Nationalist program. This is anathema to many on the Left who tend towards a “one world” levelling ideology which seeks to erase the differences between the first world and the third world. In this case, for many on the Left the combination of open borders and globalisation is exactly the right policy prescription, these processes are rapidly reducing first world standard of livings for the bottom fifty percent towards third world standards. And of course the wealthy are quite happy to see their peasants wage demands being reduced to those found in Bangladesh. A JG under these conditions will only help the process of first world pauperisation since it would encourage more poor people to come to the first world and would provide cover for companies to offshore even more jobs. In sharp contrast, a JG under a sovereign Nationalist government would only be transitory since the resulting rapid reindustrialization that a Nationalist first world country would undertake would result in an increased demand for local labour that would soon wipe out the need for a JG in the first place.

    1. Ben Wolf

      “Once again we have an MMT post that ignores all the real problems. The US has plenty of aggregate demand; there is no need to increase it. The problem is that US citizens are unable to capture enough of this demand in the form of jobs”

      Lots of rhetoric and no substance. Please provide some form of evidence, or even an argument, that the U.S. has all the demand it needs to generate full employment. It’s utterly bizzare and contradictory to claim we have plenty of demand, then argue that our trade deficit is draining it. I’ve got news for you, MMT has been arguing the latter since its birth. It seems obvious you don’t actually understand much of the terminology you’re using.

      1. Kevin de Bruxelles

        My bad, I should not have used the term aggregate demand; I should have instead used consumer expenditures.

        In any case if aggregate demand is (AD) = C + I + G + (X-M) then please explain how MMT impacts the (X-M) portion of the equation. As I said before most of the increase MMT proposes on the C (Consumer spending) variable will be offset by some percentage by an increase in the M (imports)

        Also please answer my question about whether the JG would be open to non-citizens.

        1. F. Beard

          One way to increase (X-M) would be to quit selling US Government debt. Imports should drop and/or exports should increase. Bill Mitchell calls the debt of a monetary sovereign “corporate welfare”. Let’s end it, eh?

        2. Calgacus

          how MMT impacts the (X-M) portion of the equation. As I said before most of the increase MMT proposes on the C (Consumer spending) variable will be offset by some percentage by an increase in the M (imports) Not necessarily true, and even if it is, as it probably would be in the USA, who cares? Why give a damn about it? So your sanely run economy that does not squander and destroy colossal resources imports more and helps out other demand deficient economies. Your sanity, your boom is contagious. This is supposed to be something bad?

  22. Leverage

    It looks like most commentators are missing the point of reality: There exists already a ‘JG’, is called crime and then prison, or is called military service, or is called police service (to fight crime, a lot of it created by unemployment and poverty).

    So this one of these annoying facts that refuses to go away, you can have a JG one way or an other, but you will have it. The other solution is to kill “annoying” people (obviously this would be the preferred solution of some sociopaths).

    Off course you can send a 1000 USD monthly check, this has worked well (or is working well) in the past in poor communities… not, where JG have been demonstrated to work much better at building up social cohesion and community. Also there is the issue of it being socially acceptable, and sending each taxpayer a 1000 USD would be basically diluting purchasing power, so you may as well ask for tax transfers from the wealthy to the unemployed and be done with it. Yeah these could be some solutions, but I haven’t seen these sort of schemes work to fix a community in practice (which in reality what needs are social programs where people can contribute).

    1. JTFaraday

      This rationalization for minimum wage work overlooks that up until the recent steep downturn it wasn’t that hard to land a minimum wage job. Virtually any unemployed person could choose to exercise their “retail option” for a period of time en route to “something (at least marginally) better.”

      So, given the availability of low wage scut work until recently, how do you then account for all those persons who chose/”chose” to take their chances–and they knew they were taking their chances– in, say, the drug trade rather than grinding in out in a (presumably more or less permanent) minimum wage job that did not seem like a viable means of getting by economically in life?

      The minimum wage job trolls (and permanent students employed at UM-KC) need to answer their better informed living wage job advocates.

      Without the imperious snark and (wholly unwarranted because unearned) condescension.

      1. Leverage

        There must be some strange force in the universe preventing equating minimal wage with this so-called ‘living wage’, in theory that’s what minimal wage is for. It’s not incompatible to ask for both things.

        And to your point, no one says says this will eradicate crime totally, but it certainly helps a lot. An increase in long-term unemployment (without social benefits of any kind) usually results in increased poverty AND criminality.

        I recommend you visit nations like South Africa or Argentina (which had its relatively successful JG programs during the last crisis until it was removed, which helped with this amongst other things) for an example of these things work out.

    2. F. Beard

      Also there is the issue of it being socially acceptable, and sending each taxpayer a 1000 USD would be basically diluting purchasing power, Leverage

      Turn about is fair play, isn’t it? Haven’t the banks and the rich diluted purchasing power for their benefit?

      Also, if further dilution by credit creation was banned (killing the boom-bust cycle at the same time or at least greatly attenuating it?) then the Federal Government could spend A LOT initially (a universal bailout) to cover the massive deflation as existing credit was paid off and then could afford a non-inflationary “Citizens Dividend” of considerable size afterwards.

    3. Calgacus

      Excellent, excellent comment. Hear, hear. It’s an important perspective to see that there really isn’t any such thing as unemployment. There’s just the state employing some people at “being unemployed”, torturing them for no reason at all. It’s the state, the omnipresent, the universal teacher, that is committing the great crime of forcing people to obtain that which they need to live, which can only be provided by it, and refusing it to them, because it is insane, because it does not guarantee employment.

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