Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part III

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives

Now so far, I have described the operations of the monetarysovereign as though money were the only thing in the world. But this is clearly not the case. The model of themonetary sovereign I have developed is intended to be a model of agovernment. And while governments might have nearly unlimited and very easily deployed power in the creation and destruction of money, a government also participates in the exchange of real goods and services. And these goods and services are clearly finite. So there is something very special about money which is yet to be considered.

Let’s remember that government spending – insertions ofmoney – can come in different varieties: there are purchases, in which money is inserted into a private sector account in exchange for some good or service delivered to the sovereign; and there are straight transfers, in which some money is inserted into a private sector account without condition, with the government receiving nothing in return. Similarly,we need to recall that government receipts – removals of money – can come also in different varieties: there are sales, in which money is removed from aprivate sector account in exchange for some good or service delivered by the government to the owner of that account – as when someone buys a carton from the postal service, for example – and there are taxes,in which some money is removed from a private sector account without condition, with the owner of that account receiving nothing in return.

In a democratic society, we should think of the owner of the monetary sovereign’s account as the entire public, representing a significant portion of the economy usually called the public sector. The public cannot create valuable goods out of nothing at will, or receive the benefits of valuable services at will. Thesethings come in finite amounts, and it is a very big deal to the public whetheror not it possesses some good – like a bridge, a park, or a work of public sculpture, or a dam, or a rocket engine. It is also a very big deal to the public whether it is performing some service for a private sector individual or firm, or whether that individual or firm is providing a service to the public. So, while it might make little difference whether we think of the monetary sovereign’s monetary possessions according to the infinite account model, the empty account model or the quotidien account model, we have no such freedom when considering the public’s possession and exchanges of real goods, or its receipts and provisions of the benefits of real services. When it comes to the exchange of real goods and services, what the public possesses matters. As democratic citizens, decisions over the public sector provision or acquisition of real goods and service are among the most frequentand important decisions we have to make.

And herein lies an important difference between theproduction of money and the production of other goods. Traditionally, the difference in cost between producing some unit of money, and the value that can be fetched by that money in the market when it is used to purchase something, is called “seignorage”. In earlier times, when the public’s money was fashioned from material resources like gold, which had to be mined from the ground, refined and shipped at a substantial cost, seignorage was still important, but less significant than today. But in the world of modern money, when money in colossal denominations can be created at very low cost, simply by moving a few electrons around on some hard drives by virtue of a few keystrokes on a computer keyboard, the value that is derived from seignorage is even more significant.

A democratic public that possesses seignorage power should be very hesitant to give it up, as it would for example, by ceding monetary power to private sector corporations with their relatively small collections of self-seeking owners and their hierarchical, non-democratic forms of government. If the creation of the various forms of money were permitted to be strictly a private sector endeavor in the modern world, we might reasonably suspect it would all end up in the hands of a few financial sector oligarchs – Goldman Sachs, Barclay’s, Chase, etc. – justas these oligarchs have come to dominate other forms of financial power. Nor should the public take a casual attitude toward free-styling monetary entrepreneurs who might seek to employ innovative technologies to invent forms of money that have the potential to succeed in supplanting the public’s money. They would thereby reap seignorage profit for their own private benefit, while at the same time diminishing public control over the public’s monetary system, and robbing a democratic public of its monetary power. And the romantic and entrepreneurial monetary rebel of today could easily become the monopolizing monetary kingpin of tomorrow without the restraint of democratic governance.

So let’s turn away from these anti-democratic nightmare scenarios of the public’s monetary powers falling into private hands, and return now to our simple model of the monetary sovereign, which we will regardas a democratic government connected to a public sector, wielding its monetary and other powers on behalf of public purposes.

It is important to recognize that a monetary sovereign has no operational need, strictly speaking, to borrow or tax in order to spend. By an operational need I mean something that the government must do in order to carry out some operation, and without which that operation simply cannot occur. Because the monetary sovereign can always create any money it needs in order to carry out a spending operation,there is no operational need for it first to acquire that money from some other source. In the end, recall, the monetary sovereign is responsible for all of the money that exists in the monetary system which it governs. It is the producer of the currency in that system, not a mere user ofthe currency. It is just flat wrong to view a monetary sovereign as an enterprise like any other enterprise – such as a household, a small business, a corporation – mere users of the monetary sovereign’s money whose monetary power is limited to the making of exchanges, and whose monetary scorecard is subject to ordinary budget constraints.

So the monetary sovereign has no operational need to tax or borrow in order to spend. However, the monetarily sovereign government may have a policy need to tax or borrow. That is, the government may have reasonable policy goals – such as the maintenance of price stability, the encouragement of private sector production and commerce, the promotion of economic equality or other goals- that are best carried out with the aid of taxing or borrowing. The economist Abba Lerner encouraged us to view all government financial operations functionally – that is in terms of their effects. Whether a monetarily sovereign government should engage in some particular monetary or financial operation depends entirely on the government’s policy goals, and the degree to which the operation helps advance those policy goals. Lerner thus called this approach togovernment financial operations “functional finance”, and contrasted it with the ideal of “sound finance” – an ideal based on misconstruing monetarily sovereign governments as mere currency users subject to ordinary budget constraints.

Now this idea of a monetary sovereign might seem frightening. Surely the discretionary power to create and destroy the money that is in common use is an awesome and potentially threatening power indeed. The trepidation experienced here is not at all misplaced. But it is also important to realize that the existence of such power, or at least the potential existence of such power, is inherent in the very idea of governmental sovereignty, and that much therefore depends on the specific form of government that possesses this sovereign power, and the wisdom of those who determine the actions of that government. A democratic public – in which sovereignty is distributed equally among its entire people, which endeavors to subject itself and its own governmental operations to the rule of law and appropriate checks and balances, under durable and vigilantly maintained democratic institutions – can employ its monetary sovereignty wisely and on behalf of enlightened public purposes and the general good.

The idea of monetary sovereign can also inspire a different kind of emotional reaction in people: not fear, but disapproval. The public sector under amonetarily sovereign government, if such a thing exists, seems to receive something for nothing by virtue of a seignorage power. The employment of that power effectively delivers benefits to the public that are not received in exchange for something else. All the rest of us private individuals, on the other hand, are generally required to produce something of value in exchange for the benefits we received. This asymmetry might not seem fair or appropriate, since the monetarily sovereign government has an unfair advantage over private sector economic actors. Various inhospitable terms might come to mind here to describe the monetary sovereign’s advantage: “free lunch”, “ill-gotten gains”, “theft over honest toil”, “counterfeiting” etc.

This emotional reaction can be hard for people to shake, and is even in some sense natural, but it is grounded in a profoundly wrongheaded and false analogy between the sovereign role of a self-governing people under a democracy, on the one hand, and the role of private individuals, households and companies on the other. First of all, The United States government and its people have made a substantial investment – of work and sweat and tears, and even including an investment of many lives – in order to secure something approaching monetary sovereignty for their society. So if they exercise this monetary sovereignty in the pursuit of public purposes and the general good they are hardly receiving something for nothing. They have invested a whole lot of something in the past in order to control a monetary system they can use to accomplish these public goals.

Second, a democratic government like the government of the United States is not just one enterprise among others in a competitive economic game of rising and falling fortunes, a game in which the government must therefore “play by the same rules” as every private sector individual, household or firm. The United States government is the instrument by which we the people are supposed to organize and direct our common efforts toward the fulfillment of our most important national goals and aspirations, including such things as “promotingthe general welfare” and “establishing justice.” It is absurd to suggest that because a corporation like Goldman Sachs, for example, does not possess the seignorage power that comes from monetary sovereignty, then the American people must decline to employ that power themselves, in the spirit of fairness to Goldman Sachs and the desire for a level playing field. Goldman Sachs is not entitled to a level playing field with the sovereign American people. We’re the constitutionally recognized boss in our society. If the people of the United States have been strong enough, and diligent enough, and have sacrificed enough to deny seignorage power to Goldman Sachs but preserve it for themselves and their democratic government, then tough for Goldman Sachs. But good for us.

Finally, it is absurd to claim, as some monetary commentators across the generations sometimes have, that government money printing or its modern electronic equivalents represent something analogous to counterfeiting, as though the money used by a sovereign government were the property and creature of some mysterious third party or extra- governmental power or entity that the government then fraudulently manufactures for itself. In modern economies money is the creature of a government, and its creation and regulation subject to the laws of that government. Under a democratic government, the power to create and regulate money belongs to the public. The public, working through its government, can’t be the counterfeiter of its own legally ordained money. It might make foolish decisions from time to time in the way it deploys its money-creating power, but these decisions do not encompass the counterfeiting of its own money. It is impossible for the rightful issuer of a currency to counterfeit that currency.

So the emotional aversion some feel to the exercise of monetary power by a democratic government is misguided. Much political energy, however, has gone into perpetuating these irrational reactions. The owners and servants of concentrated private financial power sometimes seek to shield the US public from a clear awareness and understanding of its own monetary powers, and from recognizing that it can deploy its inherent monetary sovereignty for public purposes so long as it organizes itself to lay hold of these powers and command them. They would like the American people to believe that the people themselves, and their democratic government, are mere users of a mysterious currency they do not control, and are thus dependent on the will of others in exercising whatever monetary power the people are permitted to wield by those mysterious powers. The plutocrats promote these myths and taboos of monetary superstition because an informed public with a clear-eyed appreciation of monetary matters would obviously work to prevent the further usurpation of their powers by plutocrats.

This is Part Three of a six-part series. Part One is here. and Part Two is here.

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  1. Frank Speaking

    “The owners and servants of concentrated private financial power sometimes seek to shield the US public from a clear awareness and understanding of its own monetary powers, and from recognizing that it can deploy its inherent monetary sovereignty for public purposes so long as it organizes itself to lay hold of these powers and command them.”

    sometimes seek to shield the US public?

    perhaps in olden days but certainly since the end of WWII shielding the US public from its monetary powers and sovereignty has become a fine art and industrial complex all its own—rivaled only by the military industrial one.

    “…so long as it organizes itself to lay hold of these powers and command them.”—and there lies the rub.

    from Christmas Day’s ‘Guardian’ another perspective worth the time to consider…

    “The case for moral capitalism: Solving the financial crisis rests on facing up to the moral failings that Keynes originally identified”

  2. F. Beard

    Finally, it is absurd to claim, as some monetary commentators across the generations sometimes have, that government money printing or its modern electronic equivalents represent something analogous to counterfeiting, as though the money used by a sovereign government were the property and creature of some mysterious third party or extra- governmental power or entity that the government then fraudulently manufactures for itself. Dan Kervick

    Government money should only be required (legal tender) for government debts (taxes and fees) not private ones. To the the extent government money is REQUIRED for private debts (legal tender laws for private debts, the capital gains tax on potential private money alternatives, etc.) then government money creation is counterfeiting.

    The need for separate government and private money supplies is implied in Matthew 22:16-22 (“Render to Caesar …”). Caesar should be content that his money is only required for government debts. And if Caesar manages his money supply responsibly, then his money will be voluntarily used for private debts too.

    1. Dan Kervick

      I can’t wait to see our brave new world of Lehmanbucks and BearStearnsbucks. Market discipline and competition in the free market for private money will no doubt prevent any bad stuff from happening – just like it did in 2008.

      1. F. Beard

        People could always choose to use government money for all debts, not just government ones. The corporations would not only have to compete with each other but also with the government’s money for the payment of private debts.

        Also, do you intend that the corporations shall have continued access to a government enforced counterfeiting cartel? That is the source of their power and their abuse. Having to issue their own money to raise real capital would reduce the power of corporations, not increase it.

        1. mansoor h. khan

          F. Beard,

          “Actually, it would not reduce corporate power but would greatly broaden the ownership of it.”

          As skippy has pointed out corporate stock issuance too is subject to fraud when issuing corps exaggerate their prospects or lie about their true financial condition.

          I think as a believer (in Christianity) this is very easy for you to counter. You in no way (I think) seek a system or rules which would create perfect justice (or anywhere near it). You only seek to (I think) make the financial system (much) fairer but not perfect.

          mansoor h. khan

          1. F. Beard

            As skippy has pointed out corporate stock issuance too is subject to fraud when issuing corps exaggerate their prospects or lie about their true financial condition. mansoor h. khan

            The solution is to accept private money only from trusted sources. Or stick to government money for all debts. Or (per the Bible) diversify.

            Most people would probably stick with government money for all debts so long as it was properly managed. And the existence of genuine private money alternatives would help to insure that.

        2. Nanny_Booboo

          Dude, you come across as a complete nutcase. What with your off-putting christianity, constant cries of ‘fascism’ (the Christian God is the ultimate fascist btw) and delusional belief that private currencies is the way to go, I really have to question your sanity.

          1. JamesW

            the Christian God is the ultimate fascist btw

            Excellent point, this entire domination/submission thing only serves scams, whether they be institutionalized religions, or Goldman Sachs, JPMorgan Chase, and the corporate fascist state, etc.

          2. Mansoor H. Khan

            “this entire domination/submission thing only serves scams”

            You not getting the point. The whole reason for existence (on earth) is to destroy false gods and false institutions which don’t serve humanity.

            destroy in this sense means intellectually (by educating the masses about money, economy etc.)

            mansoor h. khan

          3. Darren Kenworthy

            The few defraud the many of their goods and their gods. The “Christian God” you refer to is just one of the idols the powerful have set up to keep people from accessing the very real wellsprings of divine power drawn upon by spiritual revolutionaries like Jesus of Nazereth, and Muhammad of Medina.

          4. Mansoor H. Khan

            “accessing the very real wellsprings of divine power”

            In part the act of fighting the bad (people) by sword of the mind, by the sword of tongue and by the sword of ballet box is in fact accessing the wellspring.

            Islam (and other religions teach) that worship is not only going to the temple and praying or also enjoying the creation (like eating a tasty meal or making love to your spouse) and fighting evil is also worship.

            mansoor h. khan

      2. Lidia

        “Private money” might at least have some foundation in reality, trading on the soundness of the underlying issuing institutions EX any power of taxation.

        I find Thomas Greco’s arguments convincing vis à vis the “credit commons”. Private banks, with the assistance of the governments they’ve co-opted, have come to monopolize the credit function in societies worldwide. Taking back the individual and public power to extend credit would render it a more transparent and healthful function, executed as a sound public utility rather than a depraved and squalid source of extraction of rents by parties infinitely far removed from the enterprises in question.

        The end of growth need not mean the end of credit, but I think it means -definitively- the end of credit as a large-scale automatic extractive rentier activity. Credit will need to take on a more flexible low-profile -even “guerrilla”- guise, which will, I hope, be inclined towards schemes representing the restorative rather than the exhaustive.

        With that in mind, seeing as (essentially) all money today is credit, we need to consider seriously the assumptions underlying that credit, not just what games one can play once the notes are issued. It’s time to get down to brass tacks. The only source of wealth is the sun and the earth. All else is obfuscation, trickery, sleight-of-hand, and three-card-monte-ism. The laws of thermodynamics can be ignored but not contravened.

      3. JTFaraday

        I take it you haven’t heard about the “liberty dollars” episode.

        I don’t know. Should Fedgov *really* have the power to seize 2 tons of privately owned precious metals just because it doesn’t want people voluntarily trading “Ron Paul silver dollars” with each other instead of Federal Reserve notes?

        I share some of your skepticism, but it also seems to me that if TehTreasuryBoyzFromGoldmanSachsBucks are going to be in short supply out in the real economy, then people may start to decide they need units of exchange other than blow jobs.

        (Sorry. Sometimes I can’t help myself).

        With regard to that real need, certainly I think the Ron Paul silver dollar is largely public spectacle– as some people might say of OWS– but it may in fact be worth considering whether or not the captured federal government’s monopoly on monetary units of exchange is really serving the public interest.

        You also have to wonder at the reasons underlying the mighty Sovereign printing press’s obvious over reaction.

    2. Frank Speaking

      geez F. Beard, all this time I thought you were decrying fascism and it turns out you are a proponent of fascism!

      won’t make that mistake again.

      combining that with your fascination for all things biblical I’m betting you are a falangist.

      1. F. Beard

        I see nothing inherently wrong with corporations. They are a way for people to democratically consolidate their capital for economies of scale WITHOUT having to use the banking system.

        Once the government enforced counterfeiting cartel is abolished, how else should capital be consolidated when necessary?

        Though abolishing the banking cartel would greatly reduce wealth disparity over time, I am also for a metered bailout of the entire population till all private debt is paid off. Not only is that just but it would also prevent massive deflation once banks were no longer allowed to counterfeit.

          1. EconCCX

            >>and I think we all know who you mean when you refer to the “banking cartel”<<

            I believe he's referring to nonstate entities with the privilege of creating money entries that are accepted and insured by the state. Is that what you think "we all know"?

            If not, please share your own personal interpretation of Beard's meaning, as others, each speaking for himself or herself, do the same.

        1. skippy

          “I see nothing inherently wrong with corporations. They are a way for people to democratically consolidate their capital for economies of scale WITHOUT having to use the banking system.” – Beard.

          Skippy…. Large vertical authoritarian structures, democratic? Consolidate capital? Come on, your trading one set of capital black holes for another, banks – corporations, why. Where do you want power to reside and why?

          1. F. Beard

            Where do you want power to reside and why? skippy

            Power ultimately resides with the government since it has a sovereign monopoly on force. Currently that power is exercised for the sake of the banks which should be purely private businesses. That is fascism and is inherently unfair.

          2. skippy

            Please answer the question, it is direct and not difficult to respond too. Where would power reside… in your book.

            BTW conflation of operatives ie. sovereign actions portrayed as collusion between the banking sector and federal government aka Fascism is farcical. The sovereign is acting at the behest of the private sector or the sovereign has become the H.R. – legal department of the private sector.

            Skippy… incessant banging of_a drum_is not evidence.

          3. F. Beard

            Where would power reside… in your book. skippy

            Government has its legitimate realm and the private sector has its legitimate realm. Currently we have a mixed government/private sector; that is fascism.

            Since your comments are tending toward irrelevant and since I am under some kinda of comment quota, please pardon me if I don’t further respond.

            But I’ll end with this: I see a wrong that needs correcting and I advocate restitution and reform. That does not mean that I have or must have a grand plan for society. I do not nor would I ever presume to nor would I ever care to.

          4. skippy

            Still dodging a legitimate question, here let me show you how.

            I would suggest a fully engaged direct democracy. Power should reside in the totality of its citizens and not any one – group of organizations that’s premise is a Lamarckism like ideology.

            Skippy… Quota limit? Good grief, me wonders why? I showed you that you were factual incorrect in your spreading sky’s assertion, linguistically irrefutably and your response was some web site said it was all good ( how many interpretations from the original after how many century’s? ). Yet you have an analytical or divinely inspired validity to any thing? Mon Dieu! More like mishmash-ed borrowed thoughts being sucked into a bias singularity.

            PS. one book accentuated with a few others is not a sound footing for arguments in this day and age, so please desist with the indignation’s ie irrelevant et al, saying a thing does not make it factual.

          5. F. Beard

            I showed you that you were factual incorrect in your spreading sky’s assertion, skippy

            No you didn’t. Just to be sure that my modern interpretation (the NASB) was not reading modern science into the text, I searched the King James and the Wycliffe bibles and got similar results.

            search of “stretch” + “heaven” in KJV

            You will recall that the expansion of the universe is a 20th century discovery, long after the King James was written (early 17th century).

          6. F. Beard

            I would suggest a fully engaged direct democracy. skippy

            I believe in a more incremental approach so as to err on the side of prudence. Banking is based on counterfeiting, usury and special government privileges for the banks. Who knows what evils will cease once the banking cartel is abolished and the population is bailed out of all debt to it?

          7. skippy


            The heavens and earth are said to be stretched out at creation. The Hebrew word hfn is used for the heavens while the Hebrew word uqr is used for the earth.

            The Hebrew word hfn occurs ten times in the OT in the context of God stretching out the heavens. It is used five times in the book of Isaiah (40:22, 42:5, 44:24, 45:12, 51:13). It also occurs in Job 9:8, Psalm 104:2, Zechariah 12:1 and in Jeremiah 10:12 and 51:15. In Jeremiah hfn is used as a Qal perfect, which means the “stretching” is past completed action. In all other references it is a Qal participle. The participle indicates continuous action; however, the context of these verses show that they are also past completed action at the time of creation.


            “The participle indicates continuous action; however,the context of these verses show that they are also past completed action at the time of creation.”

            This is not an interpretation by some mob you choose to believe, its grounded in the root language… as gods word. It is the one and only meaning *past completed action*, hence you can not bring some interpretation of an interpretation from some biblical re-thinkers…cough flat earth, center of the universe – solar system, only life present any where revisionists and say its an irrefutable empirical peer reviewed fact. OT stuff to boot and not NT Christianity.

            Skippy…The Cognitive Dissonance is… breath taking.

            PS.. in case you refuse to do home work see:

            The spreading of daylight at dawn may have suggested the idea of the firmament being spread out since this is what the Hebrew word uyqr means. The heavens are also said to be rolled out as a scroll (Isaiah 34:4; Revelation 6:14).

            In Isaiah 40:22 the heavens are stretched out like a qd, thin veil. Delitzsch explains it as a thin fabric like a thin transparent garment (Keil and Delitzsch 1976, 152). In the next phrase it is like a lha, tent, This is the usual word for tent which was made out of stretched animals skins. In Psalm 104:2 it is described as a juyry curtain. This word is used for the curtains of the tabernacle (Ex 26:1) and curtains of tents in general (Jer 4:20; BDB 1980, 438). In other places hfn is used to describe the spreading, or pitching of a tent (Gen 33:19 and Ex 33:7). The main way of putting up a tent was to stretch out the animal skin over the poles, and then fasten them down.

            Psalm 104 parallels the order of creation in Genesis one. The first verse and the first part of the second verse describe day one. Verses 2b-4 describes day two, and verses 5-9 describes day three. Psalm 104:2b says, “he stretches out the heavens like a tent.” Herder comments, “They represent God as daily spreading it (heaven) out, and fastening it at the extremity of the horizon to the pillars of heaven, the mountains” (Perowne 1976, 235). Verse three says, “and he lays the beams of his upper chambers on their waters.” The Hebrew word for “upper chambers” is hylu which means “roof-chamber” (BDB 1980, 751). It is used in I Kings 17:19 and 23. In Nehemiah 3:31-32 it is used for a roof-chamber with walls over a gateway. It is also used in Solomon’s temple according to 2 Chron 3:9. In Psalm 104:13 it explains that the upper chambers contains water which God rains down upon the earth. The beams of the upper chambers are probably laid on the waters that are above the firmament to contain the waters for whenever God wants to let it rain; however, it could mean that the support beams of the firmament are founded upon the waters on earth. In Amos 9:6 the firmament is founded upon the earth.

            In Job 26:7 it says that God stretched out the North, or heaven over the void, or deep. I think that the context indicates that the “north” is used synonymously with heaven. The part is used for the whole. First of all the word hfn is used only to describe the heavens, not the earth. The parallelism of heaven and earth is common, and to be expected. The Hebrew word for “north” is /px (BDB 1980, 860). In Ugaritic the word spn refers to the mountain on which Baal lived. According to Savignac /px in the OT can mean “cloudy sky” (Savignac 1984, 273-78; OT Abstracts 1968, 154). The basic meaning is “wind accompanied with clouds” (Ibid). Therefore, /px refers to the northern or cloudy sky. The part is used for the whole of heaven. The “void” is the same word that is used in Genesis 1:2. It is the Hebraic way of poetically describing the creation of the world. It was also polemically against foreign views. This stretching is probably describing what happened on the second day of creation. The firmament is stretched upward or pushed up to separate it from the watery deep below. In the beginning there was just the watery deep. Now God separated the waters. On the third day God spread out the earth over the deep.
            Akkadian Literature

            There is an interesting parallel with an Akkadian phrase in the Poem of the Righteous Sufferer which says, “Wherever the earth is laid, and the heavens are stretched out” (e-ma sak-na-at ersetim rit-pa-su same; Lambert 1960, 58-59). So in Mesopotamia the heavens were also seen as being stretched out.

            One should not read into this modern science, like the expansion of the universe, or the Big Bang theory.

            In Enuma Elish the heavens are like a roof of a house that is put over our heads. Heidel translates, “Half of her (Tiamat) he set in place and formed the shy (therewith) as a roof” (Tablet IV:138; 1942, 42).
            Egyptian Literature

            The Hymn of Amon-Re states, Who suspended the heaven, who laid down the ground, Father of the fathers of all the gods, Who suspends heaven, who laid down ground” (COS, 38-9). Wilson translates, “Raised the heavens and laid down the ground” (ANET, 365).

  3. Paul Tioxon

    In keeping with spirit of David Hume, I Paul Tioxon, will provide the necessary connection between you, the user of currency, and the U.S. Treasury, the creator of currency. Please be warned, what you are about to see is what “THEY” DON’T WANT YOU TO KNOW ABOUT!!!


    That was part 1.

    That was part 2.

    Any questions?

    1. craazyman

      Is that the kind of movie they show in Economics class?

      I liked Pirates of the Carribean better. :)

      1. Paul Tioxon

        Funny you should ask that question crazyman. No, they do not reveal the secret of printed fiat counterfeit fascist money in econ class. To do so would only mislead, distract and mystify the youth. But seriously, as you can see, money is created and I certainly did not see any debt being issued in the process. Perhaps if we cut out mister in between and just distribute the stuff as needed, we would all be better off without all of the arguing about debt issuing of T-Bills, interest rates and the like.

  4. don

    The aspect of this presentation that keeps popping up in my mind is this: to direct public money for public purpose is to suppose that the government is working for the best interest of the public rather than predominately for private interests. If one can assume that we live in a corporate state, as I do, then would it not follow that directing money to the public good presumes that government has been radically reformed to serve the public interest?

    Of course, we are not anywhere near that point yet. So while it is fine and good to delve into such matters as public money and public good to formulate long term goals, it does nothing in terms of addressing full on the more pressing issue of power relations in our society, and what is needed to get government to serve the public, as opposed to corporate interests.

    OWS brings this all the more into full view. OWS has, above all else, brought class and political economic power relations into view like we haven’t see since prior to the Great Depression. Is this not the most relevant issue at hand? And therefore does this not speak to the fact that what is most needed is to expand discussion on tactics and strategies needed to mobilize a mass movement to bring about radical reform?

    It thus appears to me at least, that this presentation, while valuable in its own right, is nonetheless largely academic.

    1. Dan Kervick

      I agree with this, don. Having a government in control of the monetary system is no help to the public unless the public is exercising democratic control of their government. As the essay gets to Parts 5 and 6, it will become clearer that the main theme of the essay is the restoration of democratic government and democratic society, so that an activist public sector can be a tool to serve the public interest.

      1. Max424

        What good would it do the public to exercise democratic control over government, if that government did not control its own money creation?

        It would be kind of pointless, wouldn’t it? I mean, what good is attempting to control something, that is completely controlled by something else?

        Italy provides a good example. Recently, we found out that Italians are no longer allowed to elect their Prime Minister; but, even if at some point in the future, they regain this right, it won’t make a damn bit of difference, because their country, is now a simple fiefdom of the banks.

        Italians can vote in elections –and change leaders– till the cows come home, but as long as the Italian nation gives over its sovereignty to international banking, Italy can never be a democracy — only a client state.

        Money is power, and money creation, is the ultimate power. Whoever controls it, wins. If democracies hand over this power, they will not be democracies for long.

        You want a democracy, the foremost priority must be, control money, especially its creation.

        1. Dan Kervick

          Agreed. I just meant that government control over money isn’t enough. the public needs to be running the government in the public interest.

          1. Lidia

            I agree with max and don: what you propose, Dan Kervick, will never happen. “…the public needs to be running the government in the public interest…” This never did happen and it was never meant to happen.

            Only by overthrowing or (more easily, imo) somehow getting out from under the existing system will we survive. The system as it is, is not reformable.

            Max makes a good point, and I would say further that it is only the happenstance of the parliamentary structure of Greece and Italy that allows us to see the banker coups of, simultaneously and respectively, both a left-wing and a right-wing government which previously enjoyed popular mandates.

            Can we really say that the US is different?

            As far as banksterism is concerned, there has been exactly zero change that I can see from the installation of Bush to the installation of Obama. I feel that it is only the circumstance of US political structure –which requires a full four-year term for a figurehead president– that gives the US better “optics” on this score. The US is no better than Europe and is equally effectively run by the banks, despite the bankruptcy of these latter institutions as well.

            We have a zombie private enterprise controlling a zombie public enterprise. Neither one will acknowledge being dead, nor will they acknowledge the death of the institution they know to be propping them up (in the case of the banks, the gov.; in the case of the gov., the banks)!!

          2. Max424

            “…the public needs to be running the government in the public interest.”

            Beautifully put, because seldom, if ever, has there been a case, where a government volunteered to run a government, in the public interest.

            So I too trust the public to run my government, and that’s why I think it is imperative that the public understands, fully, what the hell is going on.

            And the first concept they should grasp (are you listening, OWS?) is this; the United States is not, and can never be, a democracy, let alone a sovereign country, if it does not control its own money creation.

            Teach John Q. Public and OWS that, and you have a chance, because domination of money creation is the weakest link in the Fascist chain.* It only takes a simple act of Congress, and Presidential pen stroke, to abolish it.

            *They know it. That’s why they fear New Deal liberals, MMT people, and students of history — especially those students who know the REDACTED HISTORY of the US economy in the period 1942 to 1945 — when US greenbacks were put to work solely on behalf of the United States. The economy boomed. We knew full employment, near zero percent inflation, and 15% average growth.

            We also, incidentally, whupped two great imperial powers, easily and completely, on either sides of the globe. That’s how great this nation was in the brief, and only period, when it had complete control of its OWN money.

          3. jake chase

            Well, the entire Twentieth Century proves rather conclusively that government is run for private purposes, the two principal ones being business imperialism and business speculation. So, ceding more power to these business governments would only make the fascist program run that much more smoothly. Isn’t it bad enough to have these elected cartoon characters presiding over wars, bubbles, crashes, medicine, pharmaceutical recreation, education, transportation, communications? You want to give them more power over money? What will happen then is that those unconnected to government will never get more than a subsistence, and those who manage to save any will watch it disappear as your cartoon government lurches from one idiotic public purpose to another.

        2. Lidia

          Max, I’m not sure if you know the half of it. Speaking of “controlling money”, Romano Prodi (yet another of the many Italian Goldman Sachs alum along with Monti and Draghi) presided over the most extraordinary wholesale robbery of a populace in a developed, “capitalist” country that I have ever heard of, to the tune of 7.5% of ALL BANK BALANCES IN THE COUNTRY.

          People just woke up one day in the early 1990s, and had 7.5% less in their bank accounts; the government had taken it under cover of darkness.

          Prodi, an ex-EU president on top of everything, is one of those who’s been banging the drum for a cashless society for decades, having wanted to criminalize cash transactions over €100 (about $130). (When you have cash, they can’t take 7.5% of it quite as easily as when it’s in electronic form.)

          Prodi notoriously presents himself as a high-toned yet mild-mannered “professor” with an almost comical, clownish affect. Underneath lies a perfidy that is bottomless.

          1. Max424

            re: cashless society

            I used to comment daily on the Matt Yglesias blog, back when it was at Think Progress. It was a case of an old New Deal liberal, me, taking on a faux-progressive, Matt, or, the old-left vs the new center-right.

            The idea was to pull Matty back toward the center (maybe even beyond the center!). I thought it was a worthy goal. But then Matt started writing about removing cash completely from the economy — so that banks could create nominal interest rates below zero.

            No more zero bound!

            That’s when I realized Matt had decided to join the criminally insane elite. He was no longer a self-admitted liberal sell-out, but a man who wanted to actively participate in, and profit by, the easy, breezy, DIGITAL THEFT of American people.

          2. Lidia

            Interesting. I have only casually read Yglesias from time to time.

            I have to say that I believe that -effectively- negative interest rates are what the doctor would order.

            One has only to look at the projected rate of resource extraction to determine the potential for growth and hence for the practical interest-bearing function of money (less than nil).

            When Greenspan was accused of keeping interest rates “too low”, I was apparently in the minority in thinking that that 1% represented real GDP growth at the time (leaving aside the fact that GDP is merely a measure of waste and not of economic well-being), rather than some other “wishful thinking” GDP growth number.

            Our money system is in tilt because we cannot process negative growth and, perforce, negative interest. That doesn’t mean that other money systems have not countenanced such a phenomenon.

        3. Doug Terpstra

          “Give me control of a nation’s money and I care not who makes it’s laws” – Mayer Amschel Bauer Rothschild

      2. don

        Thanks for the reply Dan.

        The most interesting aspect of this is not that we need democratic control of the government . . . that is stating the obvious. Much more important is by what means are we able to claim control over the government from existing corporate control — how might this come about? How might civil society raise above corporate private economic interests who currently hold government hostage? What might galvanize social movements to gain power to challenge the status quo, and what strategies enfold to make this a reality?

        Your approach to MMT certainly provides it with substance which is sorely lacking, in my estimation. I have found MMT advocates to be locked into a very narrow perspective, pushing the perspective to the point of appearing almost fanatical — as if they hold some key that if only used would open the door to some magical outcome, and thus appreciate that you are expanding upon it to provide something of greater substance. Still, I wonder if your focus on the monetary does your larger perspective a disservice.

        As I see it, MMT commentary should be looked upon for what it is: a narrow, monetary focus that adds very little in the way of understanding of how we get from where we are to where we need be to establish a truly justice society. No doubt it is true that a justice society will include a monetary system that engenders equality (of opportunity, etc.), functioning more as a utility to facilitate an egalitarian society rather than one in which high finance acts as a parasite to the ‘real’ economy.

        1. Max424

          “MMT…adds very little in the way of understanding of how we get from where we are to where we need be to establish a truly justice society.”

          Utter nonsense. You cannot have a democratic or just society if the public doesn’t control money creation.

          Why is this so hard to understand? It’s like everybody believes we should give all of our newly printed dollars to unelected elites, because somehow, this will move the nation us closer to democracy, and justice for all.

        2. Dan Kervick

          don, part of my view on taking back government:

          The plutocracy exercises control over us not because it has toppled democratic institutions, but because it controls a vast media and PR communications apparatus, a noise machine that manufactures a large share of the messages people are able to hear. The plutocrats don’t (yet) control the machinery of voting in any substantial way, but they control the minds of many voters. Money plays such a huge role in our elections because running and winning an election campaign requires a large communications effort, and that usually costs a lot of money.

          So the task is clear: Occupy needs to focus on building channels of communication that thwart and circumvent the established plutocratic media channels, and give people the information they need to make more informed decisions. If we can raise the public voice and turn down the plutocratic noise machine, we can overthrow the plutocracy the old-fashioned way: we can just vote the bastards out. Occupy might try to work on building a large, grass-roots media network. In a sense, such a thing is already taking place. If the information and quality and seriousness and accuracy are superior to the crap-media people absorb now, people will eventually gravitate toward it.

          On MTT: MMT is not in itself a political viewpoint – at least not primarily. It is mainly a description of how our contemporary monetary system works, along with a description of other aspects of our economic life. The main MMT thinkers represent a variety of political viewpoints. In that sense it is “narrow” – it’s chief focus is on describing what is, not what should be.

          In my essay, on the other hand, I try to develop an approach to our political challenges, the “What is to be done?” question. There will be a lot more of that in Parts 4, 5 and 6 – especially in 5 and 6. While I know several of the MMT writers agree with me on some of the points, I suspect there will also be stuff that several of them would disagree with as well, maybe strongly.

          1. Joe Firestone (LetsGetitDone)

            I agree with Dan, that this is about democracy and overcoming plutocracy. It’s been in my writing for a long time now, and I’ve understood that MMT, while it cannot alone free us, when combined with the kind of tight regulation prescribed by Bill Black and Randy Wray are two elements that help us get democracy back. But, standing in the way of the use of MMT for the public purpose is the money and the consequent manipulation being used by the plutocracy to consolidate its regime. So how can we overcome its money, and how can counterpose a narrative that is closer to the reality than their constructions are?

            I’ve thought a lot about that and I believe that we can do that through political organization. OWS is part of the answer to the problem of ideological manipulation, and it is part of the answer to astro-turfing by the elite.

            But, in addition, new web platforms can help to magnify the organizing power of Americans so that the influence of money can be overcome. I’ve written about that here:




            and, most recently, in the series, still in progress, leading to this recent post:

            MMT could be implemented for the public purpose by the right President with the kind of majority Obama had in January of 2009, and much could be done even today if he were willing to do something like this:

            But it would take a very rare president to do something like that, so I expect that a movement that takes over the political system will have to come first, and MMT for the public purpose will have to come later.

            Btw, Money for the public purpose, even put in just that way isn’t a new idea. Money and the Public Purpose was the title of one of Galbraith the elder’s most popular books back in the 1970s, and certainly it was the idea that informed and motivated Marriner Eccles, not so very long ago.

          2. psychohistorian

            Thanks for putting this out there and responding to questions, Dan.

            I believe that solutions exist to many of the problems we face if we would just change the incentives and basic class social organizational “top down” structure into something that has the benefits accruing to the public rather than now to the global inherited rich that are at the top of our current social structure.

            Laugh the global inherited rich out of control of “Western Democracies” in a manner that makes extremely clear what sort of social hierarchy and the resulting anti-humanistic results we want to prevent to occur going forward.

            I learn from all the commenters….well, most.

          3. jake chase

            Dan, you really need a reality check. The great mass of people are not so much ignorant as they are stupid. Stupidity is willful ignorance. Stupidity means you just don’t give a shit. They watch television because it is on. They don’t care about programs, about commercials, about information, about entertainment, about anything but getting through today. They smoke, they drink, the turn on, they shoot up, they paint themselves blue, they cheer, they volunteer to kill foreigners, they stockpile weapons, they screw anything they can lay their hands on. A Ralph Nader gets 2% of their vote, and probably half of that 2% was by mistake. More than 50% of them thought GWB was intelligent! The only reason most of them don’t run amok is they believe God is watching them. You want to educate them? Good luck with that. I have been trying to educate my wife for fifteen years, and she went to medical school. She still believes Democrats are evil and Republicans are right. She still watches Nancy Grace, religiously. I am grateful that she loves sports and plays golf and cooks like a wizard.

      3. JEHR

        I, for one, really appreciate this “academic” information about how the monetary system works. Having this knowledge lets me appreciate better the things I read on various internet sites. I can at least begin to distinguish between those statements that are nonsense and those that carry a lot of weight. Thank you for taking the time to explain this important issue.

        1. Dan Kervick

          Thanks for the support JEHR. The essay turned out to be much longer than what I had originally planned to write, and it absorbed a lot of time. So comments like yours make me think it was all worthwhile.

          Just a note on the “academic” thing: I do have a PhD – but it’s in philosophy, not economics. My thinking on the economic issues in this essay is the fruit of a couple of years with wrestling with the things I was reading – just like you – and then doing research on my own to try to fill in the many holes in my knowledge and overcome confusion. There are two years + of very embarrassing and blundering blog comments behind this essay, and I’m sure a lot of people think I’m still blundering. But we can’t leave it all up to the professional economists to figure out everything and tell the whole story. We all have a perspective to bring to the story.

          So the point is that when it comes to economic I’m just a regular person responding to my anxiety about the deep crisis we’re in by trying to figure things out and inform myself. If you think you’re learning something from what I’ve written, that’s great. And then that should give you some confidence that we can all succeed in seeking out the knowledge we need to form better judgments about what’s going on, and become each others’ teachers.

          1. Max424

            “…and become each others’ teachers.”

            Here, here. Good discussion. And Joe Firestone above, thanks for the link. Reading it, I was thinking, “Mike Norman would make a good president.”

            Is he running? Hell, if he isn’t, I’ll write him in.

  5. BruceNY

    Anyone can create “claims on future production”, aka “money”. Monetary sovereign currencies, casino chips, and the now ubiquitous retailer “gift cards” are all examples of such.

    The problem is acceptance. This example works ( for now) for the USD worldwide. And certainly for most currencies it works in- country primarily due to legal tender laws.

    But countries have to have their currency accepted by other countries also. This is the primary reason for the euro’s creation, and the reason the peripherals do not want to leave. I am pretty sure the Greeks know how little their drachmas would fetch in the way of imported stuff outside of

    And it would fetch even less outside of Greece if Greece said, “we are a monetary sovereign, we don’t need taxes, let’s just create drachmas to pay for what we want”. Once taxes are removed, there’s no ” brake” on the quantity created. Who wants to be paid in a currency that there is constantly more and more of?

    More importantly, who wants to save in that currency? I have an old shoebox full of old italian, mexican, brazilian, carribean and even asian currencies. Big numbers on them. All worthless. Most of the currencies don’t even exist anymore. So the question is, with nearly 1.5 trillion a year in new money creation ( the deficit) on the fiscal side alone, how much longer will the world want to save in USD?

    And what happens if it decides it doesn’t? What happens if the world decides, “uhm, no thanks. No more USD for widgets.”. Or no more euros, or yen?

    And if the US eliminated taxation, and ran an even larger deficit, do you think that would be viewed positively, or negatively, by savers of USD?

      1. BruceNY

        I will say that your question prompted me to read about the Italian Lira’s history in Wikipedia. Fascinating.

    1. marcos

      The value of any fiat currency on the international market is bounded by the value of foreign exchange earned from exports.

      Domestically the monetary sovereign has flexibility and latitude, for example can can print money to buy purely domestic goods and services such as Social Security and Medicare, a flexibility that is just not available when it comes to paying for imports with hard currency.

      The rest of the world has had enough of US financial imperialism, the dollar has taken the death blow, now the beast is lumbering across the savannah, weakening, tiring.

    2. Lafayette


      And if the US eliminated taxation, and ran an even larger deficit, do you think that would be viewed positively, or negatively, by savers of USD?

      And if we had a balanced budget, why should we care?

      We, the sheeple, have been living beyond our means off comparatively cheap goods from China. And should we blame China for lending us the money with which to fulfill our get-it-at-a-bargain-price fantasies?

      Let’s not forget, it is our consumerist society that invented “shop till you drop”.

      We’ve had notorious negative savings rates up until 2009. Why? Because once upon a time (and I remember it well), we Americans saved in the present to purchase with cash in the future. We upended that by bringing the future into the present in our “instant gratification” society by means of consumer-credit.

      And we thus started living beyond our means, pushing the debt continually into the future – but never paying it off. Try that as an individual and you get foreclosed. But when you’re Uncle Sam, the bankers just smile and kiss your ass.

      Let’s not look to blame others for our own self-indulgence. “We have met the enemy and he is us.”(“Pogo” by Walt Kelly)

      1. marcos

        The range of options originating from the Congress is constrained by the fact that when the Democrats had 60 Senators and +60 in the House, the country moved further to the right. I do not see a scenario where the kind of reform we need originates from the Congress before too much of the system collapses.

        The US has not been “living beyond its means.” The US has enjoyed an anomalous period of high levels of consumption since the end of WWII through a combination of industrial and then economic and military supremacy. In effect, the US took raw materials from the global south at gunpoint, condemning those people to brutal lives of squalor. Much immigration represents people leaving those conditions to seek the resources with which we absconded and reserved here.

        The US China trade relationship is similar to the Germany/southern EU trade relationship. Whenever surplus profits accumulate, they are either converted into importer currency which results in that currency gaining value. High value currencies do not make for favorable exports. So the alternative is to repatriate those funds into the currency of the importer to keep the game of musical trade chairs going.

        It is not so much that the US or EU south is “living beyond its means,” rather that profits are burning holes in the pockets of China and Germany that get pushed back onto the importers in the form of debt. It is just cheaper that way but does not reflect on fiscal profligacy in any manner whatsoever on its own.

    3. Calgacus

      And certainly for most currencies it works in- country primarily due to legal tender laws.No, in no country ever anywhere. Legal tender laws have essentially no economic meaning or effect. Many countries do not or never had them. They are about as important as whose pictures are on the currency.

      As Marcos says “The value of any fiat currency on the international market is bounded by the value of foreign exchange earned from exports.” This is a lower bound. There would probably be little international savings desire for drachma at first – but because Greece has valuable exports and tourism – its foreign exchange value would be determined by these.

      Sure, one could have problems of printing too much money. BUT THAT IS UTTERLY UNLIKE THE WORLD WE LIVE IN. Do you think it is sensible to build levees to protect your house from floods – when it is on fire? The US government budget deficit is clearly much too small, as evinced by mass unemployment and anemic growth. Printing more money would effectively print more real wealth, and not cause price inflation. 1.5 trillion is chump change compared to the wealth of the USA. Banks created more than that during the boom – and nobody took note of it. Europe is even worse. Greece adopted the Euro and stays on this suicide pact because they believed & believe insane, innumerate “economics”. Nobody is proposing that taxation be eliminated. Just proposing that people notice what is in front of their faces, that taxation in most of the developed world is too high and too regressive, to the point or wreaking enormous & entirely unnecessary economic devastation.

  6. JTFaraday

    “So let’s turn away from these anti-democratic nightmare scenarios of the public’s monetary powers falling into private hands, and return now to our simple model of the monetary sovereign”–

    Wait!! I thought tinker toyz were illegal in MMT?!

  7. marcos

    How do we crack the chicken and egg problem that in order to perform the political heavy lift required to reclaim monetary sovereignty, we must solve the campaign finance problem?

    The campaign finance problem is caused by the outsourcing of monetary sovereignty to the private sector which allows it to in effect print money to buy elections.

    We are faced with a collapsing Democrat Party and a Republican Party that has been taken over by wingnuts. The electoral system only turns to the right, voting is not a viable vector for change.

    At Occupy San Francisco in November, before it was busted up, an employee from the Federal Reserve came by to chat at the welcome table that I liked to spend time at. We got an amazing supportive cross section of the greater Bay Area passing through.

    The Fed guy expected to demolish a Ron Paul “end the fed” fanatic. After 40 minutes of dialog, where I broke down a cogent progressive critique of the Fed based on public versus private credit, he asked me if I study economics textbooks 24/7. This stuff is not rocket science although it is complicated. I count MMT theorists like Michael Hudson as a major influence.

    Enjoying this series, thanks.

    1. Lafayette


      ow do we crack the chicken and egg problem that in order to perform the political heavy lift required to reclaim monetary sovereignty, we must solve the campaign finance problem?


      There ain’t no QuickFix for America’s problems given the circumstances. It’s going to take a very long period of reformation to get it right.

      Let’s not expect the campaign-finance problem to fix itself. We’ve tried multiple times and failed each. And, of course, the Roberts Supremes through more wood onto the fire by authorizing open-ended funding of the SuperPACs.

      What we can, however, do is simple: Undertake A Progressive Agenda for National Reform that is employed as a litmus-test for progressive candidates in Congress.

      Over time and once there are enough of them, then America will finally, miraculously, find solutions to most of its inbred problems.

      But not before then and not from this present crowd in LaLaLand on the Potomac. Renewal must start somewhere and, for America, that somewhere is in Congress.

  8. Nate

    Not quite sure about what is “public money”. Is that all the receipt from tax collection? Also what is”public purpose”? And who are the “public”?

    Today the US of A is involved in many wars with foreign nations, some are visible war with guns and bombs but mostly stealthy spy wars. Who should finance all these activities? Also the America provides foreign aid to have the leadership of foreign country stay loyal to American interests. That leadership may have any organization other than democracy which the US or A don’t really care.

    Most Americans have retirement savings managed by money mangers of banks and what the bankers do with our money is not really directly controllable, not even indirectly. There is no box to check how your money should not be invested if it may be used in any way unethical in your standard. Money can create economic wars and turned into physical wars depends on how it is used and invested in foreign countries.

    The pressing need for this country is to fix the broken US housing market equilibrium. There are approximately $10 ( ten ) trillion of mortgage debts outstanding. The equilibrium of supply and demand was hacked by creation of over supply of homes built and to counter this, the demand creation was artificially done by offering 95%, 100%, even 105% financing to unqualified buyers. This created huge momentum of up surge of house prices and when it reached the parabolic top, it crashed. There really are no remedy to fix or reverse this trend of lower and lows of housing price slide because of oversupply that existed before the artificial demand creation. However, one possibility is to forgive all mortgage debt. Once the household is freed from the mortgage slavery the economy can rebound, and re stabilize the housing market. This is up to the US supreme court to act to cancel all the paper contract for mortgages.

    1. Lafayette

      Also what is ”public purpose”?

      It is: Any governmental action or direction that purports to benefit the population as a whole.

      Aka, an “egalitarian” principle.

      Egalitarian = believing in or based on the principle that all people are equal and deserve equal rights and opportunities.

    2. spooz

      This would be unacceptable to the majority who do not hold mortgages. We’ve seen enough moral hazard since the financial crisis, and this would just be more. Also, why choose mortgage debt for jubilee? Why not credit card debt or student loans? What gives mortgage debt holders special privilege?

  9. Paul Tioxon

    This essay reminds me of an earlier public debate on the exact same issues. The result of the debate was a book by John Dewey: THE PUBLIC AND ITS PROBLEMS. In this book, the themes of democracy, and individuality as well as the problems of economics as a valid social science are clarified and some of the great motivating ideas of political activism of our country are found here. The phrase the Great Society was written here, he hoped it would become the Great Community. For capitalism was organizing the people and setting the form of social relations. The government, the state and its officials were not. It is an American political treasure of thought about building a participatory democracy in the face of a growing private business power vs the public interest.

    As a philosopher, Dewey was at home with wrestling with capitalism and felt that the public at large, people who may not be specialized experts, needed to become more knowledgeable about government policy choices, even if they never become the intellectual experts who developed those choices. It was and is still important to understand a nuanced technocratic argument and the consequences of choosing that path, as interpreted by the public, as they come to understand it. This is what is meant by participatory democracy towards building THE GREAT COMMUNITY.

    The book has inspired quite a few blogs. Here is a quick sample that will add to the this great essay about public money.

  10. Lafayette

    … our simple model of the monetary sovereign, which we will regardas a democratic government connected to a public sector, wielding its monetary and other powers on behalf of public purposes.

    Yes, that’s a good start.

    However, in our historical development the presence of any particular preoccupation for the general welfare and its betterment has been very rare. Thus, at each presidential election, we get the same simplistic nonsense such as Herbert Hoover’s in 1928: “A chicken in every pot and a car in every garage”.

    A nice thought but not nearly adequate in promoting the general welfare of a population, food and transportation being only two elements of our social complexion.

    But why cannot we get beyond such simplicities? Because, we, the sheeple, do not ask for more. If a “car in every garage” no longer titillates our fancy, then most certainly an iPhone or iPad does. We have simply advanced the nature of our present consumerist fascination.

    What have other societies done differently? Foremost, they have another system of values. For instance, Europe, after its self-destruction in World War 2 undertook its reconstruction with other primary values in mind. For instance, housing, schooling and health care for all, regardless of one’s class or ability to afford these “public services”.

    It behooved therefore that a government plan to provide them. Thus, many years later, these Public Services remain as central pillars of an egalitarian society – with a government oversight of their provisioning. The military having clearly taken a third or fourth place as regards national budgeting.

    Of course, many European countries expand the central-services to other areas as new needs rise. Europe has a wide network of hi-speed trains connecting main population centers, entirely initiated and sponsored by the government. The development and distribution of hi-speed Internet as well as mobile communications, with their significant impact upon national productivity, also have not been left entirely to private enterprise.

    This sort of “interventionist governance” is considered anathema in the US as regards its hallowed reverence for “free markets”. However, our evolution of markets has shown them not to be as free as adequate competition would have them, but actually captives of oligopolies. Our attitude of “bigger is better” has led to market consolidations that are easily manipulable (in terms of price and availability) by oligopolists.

    Thus, as regards, for instance, the development of Internet, Telecom companies “cherry-picked” the high population centers to the detriment of rural communities also instituting prices generally higher than elsewhere world-wide.

    Our economy requires some fundamental reformation and reorientation, with much more competition than exists presently. Only regulatory oversight by a Federal government can provide that outcome – and perhaps also prevent the idiocy of a renewed financial market oversight-lapsus as occurred with the SubPrime Mess and its cataclysmic consequences.

  11. SH

    I have to consider these the most concise arguments for the congress overtaking the role of the Federal Reserve that I’ve seen. By that, I mean the most persuasive that the masses will attach to. I don’t consider myself a Calvinist, but then again, I see the writing on the wall.

    My dad was Kucinich’s campaign manager in Austin in 2008 so I’m aware of what he is doing to make this happen and I’m aware of the long shot and the political movement to make this happen.

    Here’s what scares me and makes me even more superstitious.


    1. It is very difficult to be opposed to the Fed and also opposed to this argument. I really think Ron Paul dug his grave on this one. His cause may be lost forever because this outcome is more likely than free money. This puts a free money advocate in the difficult position of supporting the Fed over Congressionally controlled money. It’s a brilliant tactic and having read the evolution on this site, I think it is new or else it would have surfaced six years ago and it could not have surfaced without Paul’s success in his fight on the Fed which is not that old.

    2. We’re now looking at more active monetary management. To think that five guys and a computer will ever happen or any other construct in a political economy is complete stupidity (I’m not saying that’s what you’re proposing, but MMTers have proposed a small working group so I present it). I think if the second best team, the Fed cannot get it right than an administrative team elected every four years will have no better chance of doing it right either. As the article states, more transfers are on the way and who knows what else?

    Good luck Dan. Your arguments are just a bit more polished than the rest even if I don’t agree. Here’s my rating of some similar voices in order. Hudson, Pilkington, Wray, Kervick.


    1. Dan Kervick

      Thanks SH. The first four parts of this essay focus on the analysis and description. You’ll have a better idea of what I advocate when you see parts 5 and 6. But in a nutshell it’s this: democratic government. Not a gold standard, not free banking, not panels of elite experts, not private conference rooms of central bankers, not anarchism, not libertarianism, not rule by a socialist “vanguard”, not rule by a plutocratic elite of corporate bosses and big bankers, not rule by technocrats. Just a legislature proposing monetary policies in open public sessions, and debating them in the context of wide open public discussion, and then voting.

    2. groo

      SH, good to see someone from the Kucinich party here.

      He seems to me the most reasonable person on the American political arena for a long time (count that in the multiple decades)
      Hudson sees through most of it, so he was a good economic advisor.

      Dan’s series I see as tackling the problem from another angle, which is a tough one indeed.

      Not to forget Yves, who is doing a marvelous job of giving a platform to a diversity of concerned thinkers and commentators.

      What Dan is alluding to throughout his series is ‘democratic control’, which would be fine, of course, but faces fierce opposition.

      It would at first require transparency, to be effective.

      If this is not put into effect, everything else will be in vain.

      Let me give an example (I’m a ‘Teuton’, in case nobody noticed):
      In the aftermath of the subprime crisis and the collapse of several German Landesbanken, there was a request from the Bavarian parliament, as to what the most deleterious trades were?

      The answer (by the Bavarian Landesbank):
      “This is a trade secret, and cannot be revealed to the parliament.
      This is the current state of affairs.
      The rumor is, that Deutsche Bank unloaded the toxic assets onto the Landesbanken, and is presumably 99% true.
      But it cannot be prosecuted.

      This despite the fact that the Landesbanken are >50% in possession of the Freistaat, i.e. the public.

      So much for ‘democratic control’.
      Never happens.

      Same with the FED.

      This I call the quest of the public to look behind the veil.
      And about THAT the battle rages.

      The wonderful TJN is all about the same.

      The Fraudsters of this world know what this is all about, and fight against anybody lifting their Kilt, which hides all sorts of dirty secrets.

      So it is one thing to deliver a logical argument, (which is to me settled for a long time), another, to expose the criminals, and eliminate their means, by which they hide their miserable souls, and make them look innocent.


  12. Karen

    I liked and agreed with Part II but not so much this Part III.

    I see a very basic problem with these arguments: governments are NEVER just transparent reflections of, and tools of, the societies they govern. Governments are run by political leaders, and most closely reflect the plans and desires of those particular human beings, for better or for worse. Being elected does not magically change a person from the ordinary human being he or she is into an all-seeing, all-wise implementer of “the public good.” It’s unrealistic to expect anything like that. That’s why our Founders put a lot of effort into trying to create strong checks and balances to restrain the human beings who run our government.

    I think the argument that there is nothing wrong with a democratic government exercising the power to create or destroy money at will has another fundamental flaw: to be useful as money, money needs to hold a reasonably stable value. If what I can get for my money is much less next week or next month than on the day I received it, then I might be better off just keeping my real goods and making a direct exchange when I can. But that’s cumbersome; I’d be much better off if I had a money available to me that I could trust, so my government is not serving me well if it takes that away (by excessively varying the amount of money in circulation).

    Prof. Kervick, have you read, “When Money Dies,” by Adam Fergusson, about the Weimar German hyperinflation?

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