Overcoming the Debt Trap

By Dean Baker

The deficit hawk gang is again trying to take our children hostage with new threats of enormous debt burdens. As in the past, most of what they claim is very misleading, if not outright false.


First and foremost, the basis of the bulk of their horror story has nothing to do with spending being out of control, but rather a broken private health care system. If per person health care costs were comparable to the costs in any other wealthy country, we would be looking at long-term budget surpluses, not gigantic deficits. This would lead honest people to focus their energies on fixing the US health care system, but not the deficit hawk gang.

I’d guess the deficit would be much the same as it grew counter cyclically with the automatic stabilizers kicking in as the economy weakened to the point the deficit got large enough to where it provided the income and net financial assets needed to stabilize output and employment. Not that there isn’t much to be done to fix the US health care system.

But there is another part of their story that contains some truth. The government is borrowing large amounts of money right now to sustain demand in the wake of the collapse of private sector spending following the deflation of the housing bubble.

Yes, the government is spending large amounts to sustain demand, but that spending is not dependent on borrowing, though it is associated with borrowing.

If the deficit continues on the projected path, the country will substantially increase its debt burden over the course of the decade.

Yes, the deficit could go higher but ‘burden’ isn’t the right term. The national debt is the dollar savings of the ‘non government’ sectors, and as such lightens the financial burden of those sectors.

A higher debt burden will imply much larger transfers from taxpayers to bondholders in future years. This will require either higher taxes or cuts in other spending.

Not necessarily. Taxes function to regulate aggregate demand. So tax increases and/or spending cuts would be in order only should aggregate demand be deemed too high, evidenced by unemployment being too low. In that case, taxes increases and/or spending cuts would serve to cool demand, not to make payments on the debt. Also, the interest on the debt only alters demand if it gets spent, which does not necessarily happen. Japan has never spent a penny of their interest income, for example.

Alternatively, the government could run larger deficits.

The informed approach is, for a given amount of spending, to adjust taxes to the level that corresponds to desired levels of employment, whatever size deficit that might mean.

However, in a decade or so, if the economy is again near full employment, higher deficits will either lead to higher inflation if the Fed opts to accommodate the deficits, or higher interest rates if it targets a low rate of inflation. The latter could crimp investment and long-run growth.

Should the informed approach be taken, and taxes lowered and the deficit thereby increased to the level that coincides with full employment, yes, the government could then go too far and keep taxes too low and sustain excess demand that drives up prices. This would be the case whether the Fed ‘accommodated the deficits’ or not. And if the Fed did elect to implement policy to raise rates to slow inflation, the point would be to slow nominal spending without slowing real spending. And in any case there is no such thing as crowding out investment, as investment is a function of consumption, with demand driving prices to a level where investment is funded.

For these reasons, it is desirable to prevent the debt from reaching the levels now projected, even if the outcome may not be the disaster promised by the deficit hawks.

Nor is the outcome that promised by the deficit doves. US deficits incurred as a by product of fiscal balance that sustains full employment do not have negative side effects if managed by an informed government.

There is a simple way to avoid a sharp rise in the interest burden associated with a higher debt. The Federal Reserve Board can buy and hold the debt that is currently being issued by the Treasury to finance the deficit.

The Fed buying the debt is functionally the same as the Treasury not issuing it. And I have supported the Treasury not issuing anything longer than 3 month T bills for a long time, etc. More on that below.

The logic of this is straightforward. If the Fed holds the debt, then the interest on the debt is paid to the Fed. The Fed then returns the interest to the Treasury each year, meaning the net cost to the government is zero.

Not exactly. What that policy would do is add the deficit spending to bank reserve balances held at the Fed, which currently pay what for all practical purposes is the overnight rate of interest targeted by the Fed. The Fed controls the fed funds rate by offering and paying interest on the overnight balances held at the Fed. This rate is currently .25%. Interestingly, 3 month Treasury bills are purchased to yield only .14% for technical reasons. I do support the policy of the Treasury not issuing securities longer than 3 months, which will produce similar results. But in either case, should the Fed decide to hike rates the balances created by federal deficit spending will earn those rates under current institutional arrangements. One way to avoid all interest payments on deficit spending would be to increase required reserves for the banking system and not pay interest on them. That, however, becomes a ‘bank tax’ that is passed through to all borrowers, passing the interest rate burden on to them.

This is not slight of hand. The point is that the economy has a huge amount of idle resources in the form of unemployed workers and excess capacity. In this situation, the increased demand created by government spending does not have to come at the expense of existing demand. The economy can simply expand to fill the additional demand created by larger deficits.

This is 100% true and I fully support the policy of adjusting the fiscal balance to that which coincides with full employment, without consideration of the interest paid on balances created by deficit spending, as above.

While that may not be true in five or ten years, assuming the economy is again near full employment, right now deficits need not lead to either higher interest rates or higher inflation.

Again, fully agreed with the conclusion.

In fact, the financial markets and the “bond market vigilantes” should even support the decision to have the Fed purchase and hold the government debt being issued now to finance the deficit. This practice will lessen the future interest burden on the Treasury. In fact, interest should be seen as an entitlement like Social Security and Medicare since it is paid each year without new authorization by Congress. If the deficit hawks had any integrity they would be insisting that we should require the Fed to hold the government debt issued during this downturn. It is a sure fire way to substantially reduce entitlement spending.

Again, the Fed buying Tsy securities is functionally identical to and nothing more than the Treasury not issuing it in the first place. Nothing more.

Of course, no one ever accused deficit hawks of being consistent. Not only do they not advocate having the Fed buy and hold the debt, they don’t even want this policy discussed in their “everything is on the table” sessions. Keeping this simple solution off the table makes good sense if your concern is not deficit reduction, but rather cutting Social Security, Medicare and other important social programs.

Fortunately, the rest of us don’t have to be bound by the deficit hawks’ agenda. If Social Security and Medicare are on the table, then having the Fed hold the debt better be on the table; otherwise, this exercise is just a charade to cut the country’s most important social programs.

Social Security has no business being on the table even under current policy of issuing longer term Treasury securities, no matter how large the deficit might be, if there is excess capacity/unemployment. How could it possibly make sense to cut aggregate demand in the current environment? It’s not like our seniors are consuming scarce real resources and creating shortages for the rest of us.

This will be a great lie detector test. We will soon know whether the deficit hawks care about the interest burden on our children or just want to destroy the social safety net.

The doves are on the right side of this argument, but if they don’t get their act together on monetary operations and reserve accounting it looks like they will continue to go down to defeat with what are inherently winning hands, with all of us the losers.

99 Responses

  1. Well there are four ways for Tsy to create interest-free money, 1. Direct Fed purchase of Treasuries , 2. Tsy overdrafting of its Fed account (this “draw authority” was available on a temporary basis until 1979), 3. Direct Tsy issuance of US currency notes, likePresident Lincoln’s Greenbacks, 4. Coinage power, Congress has delegated to Tsy its Art 1 Sect 8 power to coin money. In some cases, as with platinum bullion and proof coins, the Secretary has total discretion as to denomination and quantity (a trillion one dollar coins, a single one trillion coin– six of one, half a dozen of the other).

    This means, curiously enough, the most radical step is the only one that can be undertaken without any change in current law. Tsy already has the authority to mint coins as legal tender at any time (the Fed buys coins at face value) and can sweep the seigniorage from the Mint Enterprise Fund to General Revenue once minting costs are paid. Since coins are not public debt, they don’t impact the statutory debt limit.

    Step 1 is nice but (IIRC), the Federal Reserve Act requires Treasuries to be sold at auction (though the Fed has the emergency power to ignore the Act pretty much at will). What’s worse is that even though the debt service would be refunded to Tsy, even Fed-held Treasuries are counted against the statutory debt limit. Step 2. overdrafting, would appear to require legislation to reinstate Tsy draw authority permanently and without limit. Its unclear whether Tsy overdrafting would be counted in the statutory debt limit (I suppose if Congress ever authorized the practice, they’d clarify that point). Step 3 would simply Congreess require removal of current limitations on “US currency notes”, to wit, the $300 million cap and their inability to be used as bank reserves. Oddly enough, Tsy considers these “Greenbacks” (there’s actually $150 million or so still in circulation) to be public debt that is excluded from the statutory debt limit.

    Regardless of the method used, maintaining a FFR after adding new money to bank reserves would requires paying IOR. Paying IOR would be unnecessary, as noted above, if required reserves were increased (or the FFR was allowed to drop to zero).

    1. Beowulf, good analysis. However, I would rather see a change in the current law, formally consolidating the Treasury and central bank. Central bank “independence” is anti-democratic and needs to go. It is a chief tool of the power elite. The US needs to go to direct currency issuance with no bonds, and severe restrictions on horizontal banking, which, after all, is the primary factor in creating financial turmoil through imprudent lending and outright cheating.

      If we are going to push, let’s push for the whole enchilada.

      1. Thanks Tom. I’d agree with you on “unitary executive” grounds that the Fed is usurping the President’s constitutional authority (“The executive Power shall be vested in a President of the United States of America.”). If Tsy controlled the central bank, money would be created by option 3 above, direct Tsy issuance of “United States currency notes” (as Title 31 calls US Notes to distinguish them from “Federal Reserve notes”) and their electronic equivalents.

        Of course I disagree with its monetarist bent , but in a legislative sense, this draft “Monetary Reform Act” attacks the problem in the right way.

      2. Yes, there is already a popular movement in this direction, and it has quite a bit of steam on the net. They have the right idea, but most don’t have a clear idea of how to do it most effectively since they don’t know how the monetary system works. But I think a lot of these folks would be aboard with an MMT solution if they understood. Same with a lot of the Tea Party supporters, many of whom aren’t nut cases but just ordinary folks fed up with business as usual in Washington and Wall Street. The BP disaster is feeding into this, too, and there is a pattern. All of this is interconnected.

    2. To be fair to Warren, I was mistaken in saying he was proposing Tsy simply overdraft its Fed account (that’s the part that’d require Congress re-authorizing Tsy draw authority). What he did propose, no more Treasuries longer than 3 months, is already legal. Tsy could make that policy shift to (almost) interest-free money immediately. There wouldn’t need to be any new legislation until the next debt ceiling vote.

      Of course, the Fed won’t keep their rock bottom short-term interest rates forever. For the next 10 years, the CBO projects (based on the President’s budget) $9.76 trillion in deficit spending. Unless Congress (or, umm, the Mint) moves towards interest-free money, $5.64 trillion of that will net interest. Its the difference between deficits of 5.2% of GDP and 2.0% of GDP.

    1. I submitted this reply yesterday, but it hasn’t been posted. Warren submitted a reply, too.


      Great post!

      I do have one disagreement, and you probably know what it is. Your last paragraph where you discuss running deficits without addressing problems in the financial system is simply a red herring argument against Chartalists. There must be already 2-3 dozen articles written by Chartalists on reforming the financial system in the past two years. And, as you know, Randy Wray, a leading Chartalist, was a student of Hyman Minsky, whose understanding of financial crises strongly influences your own views on the matter. Finally, since you linked to Mosler’s site, I might also remind you that Mosler has a number of policy proposals there for the banking and financial system. I’ve mentioned all of these points several times on your own blog, but you don’t seem to have noticed.

      At any rate, overall, this was an absolutely marvelous post, the off-target criticism of Chartalism notwithstanding.


      1. Also, as Randy noted in a private email, this passage by Steve is just a complete misinterpretation of our position:

        “These accounting realities have inspired one group of non-orthodox economists – known as Chartalists – to argue that the government should run a deficit all the time, where that deficit enables the government-created segment of the money supply to expand as the economy itself grows.”

        We don’t argue that a govt should run a deficit all the time, but that whatever deficit it does run should be judged on its effects, not its size. And, given that, the “govt-created segment of the money supply” should actually probably NOT expand as the other sectors of the economy expand, at least in relation to the business cycle (that is, over the course of the business cycle, the deficit’s size relative to the economy should be counter-cyclical).

      2. Yeah, I read that and figured you guys would be on it. WTF is Steve thinking anyway? Is he just stubborn, or doesn’t he read the positions he is criticizing? I like Steve, but he can be infuriating when he “goes off.”

      3. Have any of the Chartalists taken a view on the debt-bias within the US tax structure. The IMF released a paper last year on the topic:


        If we want a system less prone to debt crises, shouldn’t we remove the tax incentives for corporations and households to lever up. I’d rather see a zero corporate tax rate but with zero deductions on interest than our current structure. And home mortgage deductibility could be replaced with a more general tax cut.

        To a large degree, the banks are just accomodating the credit demand created by these tax incentives. If we constrain the banks without changing the debt-biased tax policy, won’t the leverage just pop up somewhere else?

      4. Agreed. The incentives are wrong. This is a ploy of the financial sector to increase rents. It is bad for several reasons. First, rent-seeking is essentially unproductive and if it grows out of proportion it becomes parasitical. Secondly, Minsky’s analysis shows that credit extension leads to financial cycles and periodic financial instability. There is no doubt that this needs to be addressed on all levels possible.

      5. Exactly, this particular tax mis-pricing has had hugely negative consequenses for the U.S.

    2. right

      he’s mostly horizontal focused

      apart from misrepresenting, part of his message seems to be that the horizontal problem now is too big for the vertical solution to overcome

      WM below disagrees with that – no horizontal problem too big?

      1. I don’t think fiscal policy can alone come to the rescue. The US of A is a debtor nation. Increase fiscal stimulus and you increase imports as well before you get to increase in prices. There is no mechanism for the dollar to go weaker by itself. This increases the external world’s holding of US Assets – not just Treasuries. That means corporations would have to pay higher dividends and interest income to the external world. The foreign income is already high I think. Increase fiscal stimulus more and the external world earns even higher because imports grow as well. Where does it end. It doesn’t.

        A strong devaluation is needed. I like Bernanke’s solution too – in the famous saving glut speech http://www.federalreserve.gov/boarddocs/speeches/2005/200503102/

        “However, as I have argued today, some of the key reasons for the large U.S. current account deficit are external to the United States, implying that purely inward-looking policies are unlikely to resolve this issue. Thus a more direct approach is to help and encourage developing countries to re-enter international capital markets in their more natural role as borrowers, rather than as lenders. For example, developing countries could improve their investment climates by continuing to increase macroeconomic stability, strengthen property rights, reduce corruption, and remove barriers to the free flow of financial capital.”

      2. “Increase fiscal stimulus more and the external world earns even higher because imports grow as well. Where does it end. It doesn’t.”

        Doesn’t MMT say it’s OK? In fact, the real terms of trade improve.

      3. Bernanke: “However, as I have argued today, some of the key reasons for the large U.S. current account deficit are external to the United States, implying that purely inward-looking policies are unlikely to resolve this issue. Thus a more direct approach is to help and encourage developing countries to re-enter international capital markets in their more natural role as borrowers, rather than as lenders. For example, developing countries could improve their investment climates by continuing to increase macroeconomic stability, strengthen property rights, reduce corruption, and remove barriers to the free flow of financial capital.”

        Why are poor countries so poor?

        Should the West be forcing neoliberalism on the Third World? I don’t think so.

      4. Tom, thats a selfish solution as far as the US is concerned. I still go with the rest of my comment. Keynes argued that the surplus countries are problematic. Another solution is to encourage the ROW to go into a strong stimulus mode so that they can import from the US.

      5. Ramanan, I think you are correct here. There are two real constraints on a fiat currency, real resources and foreign trade, There are real limits to both, and crisis erupts at these limits.

        For example, we can interpret what is taking place now in the push to austerity as the result of the great leveling as global labor becomes fungible. The power elite in the West is seeking to impose austerity in order to reduce domestic labor cost by decreasing worker compensation (wages, benefits, protections, and safety net).

        Already, Michael Pettis and Andy Xie are warning about bad relations developing between the US and China. If the GFC and resulting economic contraction worsen, as it seems they will, then these kinds of challenges are only going to increase as workers balk at being led to slaughter.

      6. Ramanan, Keynes was a technocrat who believed that (Western) technocrats should control the world. I reject that. The Western power elite must not be allowed to impose its faux philosophy — theology, really — on the world. We don’t need a neoliberal Raj (Evil Empire, really) to run globalization. India gets this, actually, in resisting the blatant take-over.

      7. Ramanan, Just to calibrate it a bit, I dont know if S Keen is aware of the current specifics here in US, but WMs payroll tax holiday would result in about a $60B/mo. swing in the non-govt sectors favor.

        JKH has total household NFA at $28T (incl govt bonds which should probably be subtracted) $60B/mo could carry that 28T at about 2.5% apr short term interst rate. WMs fica tax holiday would have to help immensely here right now. but youre right much would go to purchase more imports, that would have to be watched to make sure we wouldnt need more tax cuts due to increasing net imports. Resp,

      8. Ramanan, There’s also Warren Buffett’s Import Certificate plan–

        Buffett’s plan proposes creating a market for import certificates that would represent the right to import a certain dollar amount of goods into the United States from other countries. These certificates would be issued to US exporters in an amount equal to the dollar amount of the goods they export, and can be sold to importers, who must purchase them in order to legally import goods. The price of an import certificate is set by free-market forces, and therefore ultimately is dependent on the balance between imported and exported goods through supply and demand.

        A variation of Buffet’s plan that’s more defensible under WTO rules is for Tsy to auction off import certificates and use proceeds to reduce other taxes.

      9. Matt,

        Yes my comment was not really about Steve Keen.

        I will find some numbers about the ROW holding of US securities and come back on that.

      10. Tom,

        Yes India’s politicians are better. The PM Manmohan Singh’s influences are Nicholas Kaldor and Joan Robinson. The Home Minister P Chidambaram who had been the FM for long also doesn’t believe in “free markets”. The present FM is also nice compared to other FMs. Thats why there is the NREGA in India.

        So one sees a lot of growth in India. We don’t feel any recession, though of course long way to go before being called a developed nation.

      11. Ramanan,

        I’ve recently been reading China Digital Times. Many heart-breaking stories of households having their land expropriated by local officials for use in business ventures. Local officials pressuring their constituents to buy cigarettes from a factory that they have an interest in. Local officials punishing workers that try to go on strike, imposing fees, garnishing wages, etc.

        It really puts a big spin on the “Chinese Love to Save” line, and explains how a government can drive the consumption share of GDP to 25%. What’s happening there is a real tragedy, and this is being repeated — to a lesser degree — in all the “Asian Tiger” nations. With the notable and noble exception of South Korea.

        “For example, developing countries could improve their investment climates by continuing to increase macroeconomic stability, strengthen property rights, reduce corruption, and remove barriers to the free flow of financial capital.””

        Indeed. It would be enough to end the repression, theft, corruption, and extortion. Then Chinese households would have money to spend.

      12. RSJ,

        Will check the Digital Times link. I can imagine Asian countries having extreme poverty. The movie “Slumdog Millionaire” made by Danny Boyle really hurt Indians because it exposed the extreme divide in the society, which no Indian could have dared to show on film. Very nice movie.

        The “saving” has to be seen in depth. Its the government and the central banks which have been accumulation foreign currencies at the expense of reduced consumption as you said. The households can consume if given a chance.

      13. In the end (demagog), the government is the guarantor of last resort for society. If a government fails, it loses legitimacy. So, yes, in the end, the solution must be governmental/vertical if the horizontal system blows itself up. Otherwise, there is anarchy.

  2. Dean Baker: “We will soon know whether the deficit hawks care about the interest burden on our children or just want to destroy the social safety net.”

    Gee, Dean, I already know. 🙂

  3. Keen: “I beg to differ there, and largely because I believe this financial crisis is so big that running a government deficit to counter the impact of private sector deleveraging would leave us in a stalemate situation at best. Declining private sector spending (and stagnant private money creation) could offset government attempts to revive the economy, and we could find ourselves ‘turning Japanese’ (to borrow a phrase from The Vapors) – locked into permanent stagnation.”

    He is saying that running a large enough gov’t deficit might not be sufficient to solve the problem, he is not saying that it is not necessary. 😉

    Also, his argument shares one aspect with other economics arguments I have seen that conclude that gov’t stimulus is futile. It makes no reference to the psychology — indeed, to the reality — of poverty. Poor people spend money. For one thing, they have to. For another, they are present time oriented. A bird in the hand is more than worth two in the bush for them. We can count on the poor to spend if we target the stimulus at them.

    Still, I suppose that logically he has a point. Stagnation is a possibility. However, stagnation without unemployment or poverty — we can keep giving money to the poor until they are not poor anymore — is not a bad deal, is it? 🙂 We would probably return to what seems to have been the pattern for hunter-gatherers, working 15 hrs. or so per week for food and shelter — maybe less, with robots –, and otherwise enjoying ourselves and seeking self-fulfillment and enlightenment.

  4. Just skimmed thru Steve Keen’s “challenge to Mosler’s Law”. I don’t think it’s much of a challenge. I’ll demolish it on my own blog within 24 hours, hopefully.

    1. STEVE KEEN SAYS: “…The Chartalists instead argue that government deficits should be run to counter rises in unemployment, and a leading Chartalist has the statement “Mosler’s law: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it” emblazoned on his website. I beg to differ there, and largely because I believe this financial crisis is so big that running a government deficit to counter the impact of private sector deleveraging would leave us in a stalemate situation at best. Declining private sector spending (and stagnant private money creation) could offset government attempts to revive the economy, and we could find ourselves ‘turning Japanese’ (to borrow a phrase from The Vapors) – locked into permanent stagnation. Addressing the crisis by running large government deficits alone – without confronting the reality that the private financial system lent irresponsibly for the last two decades – would also enable that irresponsible Ponzi-behaviour to continue, when that’s what really caused this crisis in the first place.


      The point here is that the entire global monetary/financial system is corrupt. Any solution that allows for the Ponzi dynamic to continue, that creates increasing wealth for the center while continuing to bleed the periphery, is bound to collapse. That is, unless Warren and the rest of you folks are OK with the eventual dissolution of the nation-state and the evolution of a neo-feudal form of international governance.

      Look, I understand that my point above reeks of hyperbole. i get it. But the solutions offered by those who would stave off austerity and deflationary forces are solutions that, by their very nature, convey trillions more in wealth to the center, while keeping the meager lifelines to the fringes operational but only at the will of the uber-rich. AT SOME POINT, those on the periphery end up suffering because the system, as Mutabaruka put it so aptly, is a fraud. The global financial system is predatory and rapacious. At least in a deflationary and austerity-driven environment, the conveyor belt of wealth to the center is exposed for what it truly is.

      1. Dan, IMHO, you’ve got this right. Globalization is the theme of the 21st century and the power elite is bent on using CB independence and transnationals to leapfrog national sovereignty and therefore democracy. This is a dangerous point in world history.

  5. as a point of logic 0 taxes (federal and state and local) are hyper inflationary.

    unemployed are people looking for paid work.

    there is no unemployment as we know it in non monetary societies.

    taxes function to create unemployment (people looking for paid work)

    A fiscal adjustment will always do the trick, just as fiscal balance is what caused the problem

    1. “there is no unemployment as we know it in non monetary societies”

      i know it’s probably econ 101, but could you summarize the logic for this?

      1. being employed requires a monetary system. the unemployed are those within that system who can’t find paid work. that isn’t to say there isn’t work to be done, just no money to pay for it. an unemployed subsistence farmer is an oxymoron. so, while introducing money facilitates specialisation by enabling trade it also creates the possibility for unemployment.

      2. “being employed requires a monetary system”

        a bit circular, isn’t it –

        if you can visualize a “non monetary society”, how can you not visualize a non monetary society with employment?

      3. before we turn circular reasoning into circular arguments :-), I’d say:

        for all practicle purposes of arguing money and economics, it makes sense to define employment as work in exchange for money or some other tradable good and unemployment as the the involuntary lack of such gainful employment for any person in search of it. without a medium of exchange that definition becomes void. you are of course free to envision a different society such as a pure barter economy, but then how do you define unemployment?

      4. I’m just trying to understand this from WM above:

        “there is no unemployment as we know it in non monetary societies”

        presumably that means there’s only full employment in non monetary societies


      5. sorry, didn’t mean to sound smart. i thought i’d answered the question :-). one last attempt:

        there are still some non monetary societies in far away jungles of south america and south asia and some nomadic people. i can’t envision any of them standing in line for the dole unless they’ve been (involuntarily?) ‘civilised’, that is tied into a monetary society. i don’t know how exactly they get each other to do things they want. maybe they just don’t unless it’s either (physically or religiously) necessary or they feel like doing it just for the hell of it. no employment, no employer, no unemployed.

        seems perfectly logical to me. maybe one of the other more economically versed people can help out.

      6. thanks for trying

        it seems to be a mainstay of monetary theory

        but I’ve never seen it explained in a way that seems logical to me; I suspect there are additional assumptions implicit in the nature of the barter economy in question, – which is a theoretical construct to begin with

        i must be thick

      7. Monetary system arise in societies that create surpluses capable of supporting a governing class and specialists (technocrats). Non-monetary societies are based on subsistence living.

        But don’t listen to economists on this. They know nothing. The economic anthropologists have studied this in detail and report based on evidence, not speculation (Robinson Crusoe). Economists have totally missed the boat on this one and are out of touch with the rest of the social sciences. They are stuck in their own heads, and they have stuck their heads stuck where the sun don’t shine.

      8. Anon,

        I always kept the MMT papers on the history of money for later reading. Have to read them. Was it ever barter ?

      9. I’m reading Thomas Crump’s The Phenomenon of Money. It a comprehensive anthropological approach.

      10. First, I don’t agree with Warren’s assertion about unemployment (I’ve seen plenty of signs reading “WILL WORK FOR FOOD”), but I think he was driving at the idea that by definition, an unemployed person is somebody who wants to work for money but can’t find a paying job. In a non-monetary society, nobody wants to work for money because they don’t value money.

        Second, in my brief study of the history of money (which consisted mostly of reading Innes’ paper), I got the sense that credit money has existed from the dawn of civilization, and in fact true barter economies have never existed. From the beginning, people have been willing to exchange goods and services for an IOU (which started out as just a notch on a stick). That IOU was money. And if the person issuing the IOU was creditworthy because of either great productivity, accumulated tangible wealth, or some sort of political power, it was possible that his IOUs would be used as a store of value and a medium of exchange. This must have happened very early on, well before the development of agriculture. Even subsistence-living societies probably found barter to be completely impractical.

      11. I’ll take a stab at this question — it might help clarify my own understanding:

        Employment is the way we get dollars to pay our tax obligations. Taxes establish a need (or “value”) for the currency. When the currency is needed, it can then be traded for other things that we need, such as food or other goods and services.

        Without taxes, you don’t need the currency. It has no value and won’t be traded for other things that have value. There’s no reason to work for the currency, you can just work directly for the things you need: grow your food, barter for shelter, etc. You don’t need employment.

      12. Thanks.

        That seems to inter-relate a few things.

        Taxes cause unemployment – which I believe is standard MMT – which I still don’t entirely understand because it seems to depend on the assumption that the unemployed are always taxed. And then it seems to hinge on the notion of an increase in “unemployment” due to an expanding labour force – people looking for jobs because they need money to pay taxes – not that they weren’t without a job before taxes were imposed.

        Anyway, that attempts to explain unemployment in a monetary economy – taxes.

        What I don’t get is why or how unemployment in a monetary economy should explain lack of unemployment in a barter economy.

        (You seem to be suggesting there is neither unemployment nor employment in a barter economy, which is a definitional matter, it seems to me)

        IMO, if somebody is producing something, they’re employed, barter or not, self-employed or not. So the question remains, why do academic (monetary) economists insist there is no unemployment in a barter economy? (Nick Rowe is one of them, I think.)

        I think it has something to do with Say’s Law.

      13. Why do economists say this? Because Adam Smith said it. Now we know from the other social sciences that Adam Smith was wrong. This is a blind alley.

  6. BIG problem w/Baker’s (and Warren’s) positions:

    All human financial systems are inherently rapacious. Wealth is ALWAYS taken from the periphery in order to make the Center richer and more powerful. As such, all financial innovation and policymaking is carried out—whether consciously or not—in an effort to further enrich the center at the expense of the edges. Baker’s assertion that the ‘deficit hawks’ have it wrong may be true in a short term world in which ‘full’ employment (of shit jobs, mind you) is the goal, but these solutions do NOTHING to alter the basic systemic structure of wealth-conveyance away from the middle class and to the oligarchs (as it were).

    1. “these solutions do NOTHING to alter the basic systemic structure of wealth-conveyance away from the middle class and to the oligarchs (as it were).”

      I think I agree with this. America, and increasingly the world, has self brainwashed itself into accepting that the CEOs/entrepreneurs deserve whatever the market offers.

      Wrong on at least two counts:

      1) It’s not the market, it’s the tax structure (or lack thereof), that they influence unduly.

      2) These high echelons of society would be just as performing (are they?) and motivated if they made 10x rather 100x the base salary.

      1. @ Bx

        My point is NOT that “…America, and increasingly the world, has self brainwashed itself into accepting that the CEOs/entrepreneurs deserve whatever the market offers…” My point is that, throughout ALL human history, economic (and political and social, of course) systems have been created to move wealth from the edges of empire to the centers of empire.

        Whether by brute military force and conquest or by HFT and collusion between rating’s agencies and big financial institutions, the forces at the center create systems that make them wealthier. Always. The folks and institutions on the periphery are MADE TO THINK that they too are becoming richer, and that is where the brainwashing takes place. But the reality persists: more and more impoverishment on the fringes, and more concentrated wealth and power at the center.

        This issue transcends taxes, per se. In a myopic sense, taxes may convey value to fiat currencies and/or impact such things as aggregate demand, etc. But in a REAL sense, all that taxation does is create another sub-system that brings more wealth to the center of the ’empire’. It matters not whether taxes increase or decrease. Tax poliocy is ALWAYS developed in order to keep the fringes from understanding just how bad off they are in relation to those in power.

      2. “My point is NOT that “…America, and increasingly the world, has self brainwashed itself into accepting that the CEOs/entrepreneurs deserve whatever the market offers…” My point is that, throughout ALL human history, economic (and political and social, of course) systems have been created to move wealth from the edges of empire to the centers of empire.”

        You see a pattern that repeats itself under a different form. I see civilization moving forward throughout history, in offering greater fairness for all, with occasional regressions, as the one I describe in the nested quote above, so we’re not going to have much agreement, with is fine by me.

        The increased skewness in the incentives structure is a waste. It is uncorrelated with greater achievements, let alone greater ethics, or what some outrageously call healthy competition. People have been brainwashed in thinking the opposite by spinning examples such as Steve Jobs of Warren Buffet (who by the way was uncooperative with the Federal Crisis Inquiry Commission).

        Only greater marginal tax rates for high incomes can restore some balance. However, the terms of the bargain between the middle and lower class on the one hand and the elite on the other has changed : the latter can take their money elsewhere, or get paid in offshore accounts etc. And effectively, that’s what they do.

      3. My point is that, throughout ALL human history, economic (and political and social, of course) systems have been created to move wealth from the edges of empire to the centers of empire.

        Turning and turning in the widening gyre
        The falcon cannot can hear the falconer;
        Things don’t fall apart; the centre cannot can hold…


      4. From an email I sent recently:

        I think it is pretty clear that the Democratic Party is to divided and unfocused, and the Establishment bought out by the power elite, to get anything significant done. The torch is going to pass to the GOP, who will do the bidding of their masters and torch the economy with faux austerity that is a really a massive redistribution to the wealthy.

        What’s going on? The Great Leveling aka The Rush To The Bottom, as labor is increasingly fungible and the workers of the world have to compete with the lowest compensated in terms of pay, benefits and protections.

        We are transiting to the New World Order in which currencies are controlled by “independent central banks” and national sovereignty is replaced by the multinationals under the direction of the power elite.

        Neoliberalism is no longer economics; it’s straight up Libertarianism that regards society as a conceptual fiction having no intrinsic reality or worth. In fact, society and government are considered obstacles to individual freedom (to suppress others). We can already see this is the attitude of the financial oligarchs and the BP hierarchy, both of which are acting like they control the situation. And they do, by playing political parties against each other through corrupt campaign finance.

        I could go on, but you get the drift. We are now engaged in revolution, and we had better recognize it before it is too late. The downside is not only that the power elite can easily win at this point, but also that the populist backlash that is already occurring in a misdirected way will be co-opted by a Fox News backed right wing demagog.

        This is serious stuff at this point. The financial crisis gives a peek at what’s to come on the economic front, where Rob Parenteau, Marshall Auerback, and Ed Harrison are already foreseeing GDII. The BP oil spill gives some insight into the coming ecological disaster that global climate change is going to involve if the world does get on the ball immediately and reduce greenhouse gases.

        As a biological unit (species) is faced with an unprecedented adaptive challenge and it’s biggest enemy is self-sabotage through ignorance, short-sightedness, and self-interest. Major biologists like James Lovelock are pessimistic about our making it. So I don’t think I am exaggerating here at all.

  7. As a point of logic, we can always have taxes set low enough so we can buy everything we can produce domestically at full employment plus all the rest of the world wants to (net) sell us.

    1. Warren – The way I’ve seen you express this idea that I like best is that taxes should always be low enough to sustain full employment.

      1. BX12,

        does this mean that Rodger will now be hired as the dean of the White House press pool?

        Seriously, though, I have two comments:

        a) you’re comparing mountains to molehills; and

        b) let’s not take this blog too far away from finance and economics; there’s been a bit too much conspiratorial nonsense posted on this thread as it is.

      2. “does this mean that Rodger will now be hired as the dean of the White House press pool?”

        No, he would have been fired for putting up a map showing the Muslim land stretching from the Atlantic to the Red Sea, where Palestinians could presumably find asylum rather than obstinately claim a petty piece of land (indistinguishable on the map).

        ” there’s been a bit too much conspiratorial nonsense posted on this thread as it is.”

        What conspiracy? Rodger chooses to advertise here and makes no secret of his strong political views in his blog. He must have his reasons. Let it be, as I do.

      3. Good plan, wrong problem. The Palestinians want their ancestral lands back, not jobs.

      4. Therein of course lies the problem, but Warren’s perhaps wishful belief is that revanchist impulses are dampened by economic prosperity. I think that’s true, and furthermore I think that the radical elements among the Palestinians think it’s true too. The terrorist groups seem to believe that preventing Palestinian economic progress is an important tactic in their war against Israel (e.g. entry points for goods are often the target of attacks).

        Fortunately, economic growth has been pretty good since 2007. In the West Bank, growth was 8.5% in 2009 and violence was at a very low level. The correlation is obviously positive, although it is not clear which way causality runs (if there is any causality at all).

      5. Yup, and the real problem is, they include all of Israel as their “ancestral lands”. When it comes to Israel/Palestine, I go with the wisdom of George Carlin: “If you think there a solution, you’re part of the problem.”

      6. There is always a solution, but neither side is willing to consider seriously discussing it. They both see it as zero sum.

      7. Have to disagree, as I have at that other thread. Carlin is quite wrong. The two state solution would probably still work. Only one side refuses to discuss the obvious solution. The problem is that Israel simply doesn’t want a solution, and its refusal of the simple and easy solution – accept the other side’s generous peace offers – e.g. the 2002 Arab Peace Initiative accepted by all of its opponents, including Hamas, which asks for little more than for Israel to abide by agreeements it has already signed. It doesn’t want to accept peace, and prefers the violence and its ill-gotten gains – the land stolen at gunpoint for the settlements, quite illegally, since 1967. Israel came close to reason in January 2001, but has reverted to (suicidal) lunacy since then.

      8. “The problem is that Israel simply doesn’t want a solution …”

        Well, I think it is more accurate to say that Israel simply doesn’t want a “final solution.”

        I think that it is unlikely that there would be a lasting peace if Israel were to accept the 2002 Arab Peace Initiative in full. There would still be significant extremist elements who would continue the war against Israel (much like Hamas continues to carry on the war from Gaza and Hezbollah continues to carry on the war from Lebanon), which would then lead to an escalating cycle of conflict. In addition, irredentist impulses would arise because of the almost 1MM Arabs living in Israel proper (not counting East Jerusalem).

        Hamas has not accepted the Arab Peace Initiative by the way. In fact, most factions of Hamas reject it.

    1. If you don’t think Israel would get real peace by accepting the Arab Peace Initiative, you disagree with most serious analysts, including many, unfortunately out of power, Israeli politicians. Israel is the attacker and usually the escalator of conflict that continues violence and breaks ceasefires. The attacker always has an easy road to peace – stop attacking. You are right, only some parts of Hamas have accepted the initiative, but it e.g. #1 leader Khaled Meshal, has said that it is a political party, not a state, and if Abbas got a real 2 state deal, it would abide by it.

      The scary irredentists are on the Israeli side. Israel complaining about Hamas and Hezbollah is comical, because they are its children – Israel created them. It supported Hamas as a counterweight to the PLO and its scary 1980s peace offensive, and Hezbollah came from Lebanese Shi’ites who at first welcomed Israel in its utterly unprovoked and bloody 1982 war of aggression. The reversal is tragic – you brought up the final solution – it is not an appropriate comparison, but it is far closer to reality to say the ones who are scheming up “final solutions” are some crazies, unfortunately with real power, in Israel, the victims being the Palestinians. This is all out of place on an economics blog, but since most people here have views opposed to the orthodox dominant mainstream view in the USA, I would hope that some might at least think that sometimes most of the truth is on one unpopular side, and that only by studying history and both sides’ narratives can one arrive at solid judgments.

    1. Koo’s conclusion: “…What governments—including Japan’s new administration—should be thinking about is how to find promising public works projects and implement them in order to offset the deflationary pressures from private-sector deleveraging and provide the private sector with a sense of direction. When private loan demand is nonexistent, the government must do whatever is necessary to find and carry out promising public works projects (including education and environment-related projects) without worrying about tax hikes…”

      DAN WEINTRAUB: The problem, if you will, with Koo’s assertion here is that it ignores the context within which these ‘public works projects’ et al would be created. The social, political and financial context is one suffused with criminal, rapacious behavior. All governments have proven themselves to be in cahoots with the most nefarious and vulturine elements of the banking industry. Trust in leadership has rightly evaporated. Those in power have demonstrated, time and again, that EVERY action undertaken is an action geared toward further enriching those institutions and individuals who already rule the world. THROUGHOUT HISTORY, eras of credit-expansion and explosions of debt have ALWAYS ended in conflagration. Always. The people become disillusioned, charismatic and power-hungry leaders emerge from the pack and turn the citizens into wolves, scapegoats are targeted, reason is replaced with rage.

      Name ONE episode in history in which decades of financial and political rape have NOT ended in war or social chaos. War and chaos, you see, are ALSO the tools of the powerful center. Who gets rich when kids go off to war? Hmmmmmm?

      1. Right. Deleveraging is still the name of the game. Banks and economists are getting worried by mortgage defaults, because this could ignite spiraling deflation that is almost impossible to reverse before the economy hits bottom. It’s the nightmare scenario that is as yet only being whispered. But more people are whispering publicly. This is scary.

      2. OK, but if you read carefully, households that are not on the verge of bankruptcy are NOT de-leveraging.

      3. OK, but if you read carefully, households that are not on the verge of bankruptcy are NOT de-leveraging.


        The point is that there is too much private debt in the system and before there can be a real and lasting economic recovery this situation has to be repaired. Spreading defaults increase the downward pressure, and eventually more and more people get squeezed by debt they can’t carry. There is still a mountain of debt that sits like a house of cards waiting to be taken down if fiscal policy does not provide the needed space to deleverage gradually.

        If there isn’t enough space provided, at best there will be a jobless recovery, with spending coming from the top, where retail spending is coming from now. The choice is basically between stagnation and deflation if fiscal policy is insufficient to provide for consumers regaining their balance.

  8. John Mertens Responds to Warren Mosler’s Million Dollar Challenge

    John Mertens says that Warren Mosler’s million dollars are safe. Mosler has offered one million dollars to any Connecticut U.S. Senate candidate who is on the ballot who can prove Mosler’s economic theories are wrong.

    “As one of two candidates currently on the ballot in November, I can say with certainty that Mr. Mosler’s economics are correct: the U.S. will not run out of dollars or face a solvency crisis like Greece. And Mr. Mosler’s jobs plan, while differing significantly from my proposals, would also work. Voters should pay close attention to the ideas of third-party candidates.”


    1. I read that guys blog. He won’t take Mosler’s million dollar challenge, but he does think Social Security is a big problem?

      1. Logical consistency doesn’t seem to be a problem in human “rationality.”

  9. Leaving aside the specifics of this case, there is a general tendency to conflate economics with politics. While economics is undoubtedly highly significant, it is not determinative. This is amply shown in US politics, where lots of people vote principle and values over their economic interests. If that were not so, the GOP would not be have been competitive in many elections, for example. The Lee Atwaters, Karl Roves, and Frank Luntz’s exploited this.

    I think that this bears on how to present MMT. It’s not just the economics. There are also deep-seated values to be taken into account. One of the criticisms I often see is that MMT is a “something for nothing” philosophy that should be reject on those grounds even if works.

    Perhaps “all humans are ration,” but rationality isn’t always what one might expect.

    1. I agree with this. The Thomas Franks of the world seem shocked when a poor laborer in Kansas votes against candidates promoting redistributionary tax policies. Franks, and perhaps many liberals, attribute that behavior to base motives (e.g. God, guns, and gays trumping economic rationality), but in fact a very important factor is a prinicipled belief in not wanting to take money which was not earned or deserved. I know a lot of people who feel that way (including myself), and I think that the more independent and self-reliant a person is the more likely he is to behave in ways which confuse academic economists.

      Anyway, MMT proponents should make their pitch the following way:

      The government needs to increase the public debt (which includes currency and reserves) over time. Here is why, … blah blah blah. How much do we need to increase it? Here is a back of the envelope estimate … blah blah blah. How do we know if we are increasing it too much, or too little? Here is how … unemployment, inflation, blah blah blah.

      1. but in fact a very important factor is a prinicipled belief in not wanting to take money which was not earned or deserved.

        Yes, which is why the red states receive much higher net subsidies from the government than the blue states, have higher levels of social spending (per capita, obviously) and receive more money in terms of welfare, disability and other benefits.

        They have absolutely no problem lining up at the trough — just like the angry tea-bagger that demands “Get government’s hands off of my medicare!” Or the man who flew an airplane into the tax office, who was receiving monthly disability checks from the government.

        It is only *between* government aid checks that they put on their “independence” hat. But twice a month, they are sure to take that hat off.

      2. That post is not up to your usual high standards RSJ. Sorry to see it.

        First, although it is silly to make state by state comparisons when we’re talking about individual behavior (states are rather arbitrary collections of people, and the red vs blue classification is even sillier), I think you’ll find that the size of state and local government is much smaller in red states, and the extent of redistributionary policy is smaller as well.

        Probably you are referring to net transfers at the federal level. If so, that is a consequence of several factors: 1) our progressive income tax coupled with a lower per capita income in red states; 2) the fact that red states happen to have lower populations and therefore disproportionate representation in the Senate; and 3) the fact that red states happen to have low population densities, which means that infrastructure spending is less efficient per capita.

        Second, many of those lined up at the government trough might actually think they earned those government checks. Somebody who is retiring today has paid into social security and medicare his entire working career, so there is some justification for that belief.

        Third, it is kind of childish to use the term tea-bagger.

        Fourth, I don’t see what the behavior of a deranged individual (one who left behind a suicide note indicating his political philosophy was to the left of European socialism) has to do with this discussion at all.

      3. Well, ESM, you are right in that I was excessively snarky.

        Nevertheless, I don’t see a correlation between conservative ideology and willingness to receive government support. And there have been studies on this. B

        asically, the economic conservatives view the government transfers that they receive as “earned” whereas the government transfers received by others are “unearned”.

        You see this all the time — particularly in rural farm areas that are completely dependent on farm subsidies and government loan guarantees. Their own subsidies are deserved whereas the income attributed to others is undeserved.

        Same thing for medicare, as the Republicans managed to successively convince elderly conservative voters that their own medicare was not an example of government healthcare. Medicare remains amazingly popular across the political spectrum, as does social security. And the same people, who receive social security and medicare are protesting against government entitlement spending — for others.

      4. Well, I only claimed that the concept of “earned vs unearned” was an important factor, but I admit I don’t have any evidence for that claim other than my own personal experience and limited capacity for introspection.

        And I certainly agree that humans have an amazing capacity to rationalize and see themselves as deserving of money or fame and other people as less so.

        But the portrayal of lower-income conservative voters as backwards, bigoted dupes by many liberals (and even Obama himself) is almost certainly grossly exaggerated and oversimplified. There is an instinctive distrust of government among many of these people which drives the positive correlation between being pro-gun, anti-welfare, and anti-tax. Perhaps religion also plays a role, although I think that religion might even be a primary driver of distrust of the government itself (when you believe in a higher authority, it seems natural to become resentful and suspicious of a “nanny” state).

        On another point, people who say superficially stupid things like “Government, hands off my Medicare!” are not necessarily deluded. Aside from the out-of-control costs that the beneficiaries don’t see, Medicare is actually a pretty well-run system with a very high level of customer satisfaction. Beneficiaries instinctively understand that when the Congress starts to tinker with something, a lot of poorly thought-out ideas become law quickly, and this can be very disruptive and harmful to their interests. It’s the government meddling with the status quo that they are protesting, not the fact that the government is involved at all. In fact, I would even make a distinction between the law-making branch of government (i.e. the Congress and the President), and the operational machinery of government (i.e. the bureaucracy). The simpleton who yells “Hands off of my Medicare!” to a Congressman is instinctively demanding that well-intentioned but clueless lawmakers should not interfere with the well-oiled bureaucracy. Frankly, I agree. I think we shouldn’t make changes to Medicare at this point which completely jumble up the system. A simple change like slowly raising the retirement age over time to account for the better health of the senior population and their longer life expectancy is all that is needed.

      5. ESM

        I agree that there may be SOME logic to arguing for the govt to keep their hands of your medicare, however the people making this claim were also the same ones saying a govt run health care system cant work. Your giving these people too much credit.

        Interestingly the health care proposal IMPROVED medicare by closing the donut hole (saving the seniors money) and increasing payments to physicians.

        Sure the portrayal of lower-income conservative voters as backwards, bigoted dupes by many liberals is almost certainly exaggerated and oversimplified but is not your portrayal of bureaucrats as clueless also oversimplified.? Reagan was right and wrong, bad govt IS a problem, good govt can be an asset.

      6. The arrogance and stupidity displayed in “what’s the matter with kansas” sums up this cultural faultline perfectly.

        The Toms Hickeys of this world leave their Progressive Paradise of front porch defecation, 2nd story ejaculation, children (what few there are) in cages for benefit of the Dogs, and underage illegal Hondouran drug dealers getting money from state while mentally damanged children are told to “take one for the team”, move to undisclosed location in “small college town” and then agitate for exactly that Governance philosphy to be imposed on small isolated communities in places without Google, Apple, or good weather.

        They cannot comprehend in their tiny half minds that there are some corpuses insufficiently endowed to survive the poison, and that these corpuses are aware that the poison will kill them and so resist it. Toms Hickeys argument is “San Francisco was great 60 years ago, and $400,000 bus drivers are great. By the way — have you not heard of dollar hegemony you hick idiot?”

        And then we have RSJ who happily uses homophobic slurs although I am sure at same time he looks down on those who vote against prop 8 as ignorant fools (which of course they also are)

      7. ESM,

        “But the portrayal of lower-income conservative voters as backwards, bigoted dupes by many liberals (and even Obama himself) is almost certainly grossly exaggerated and oversimplified”

        Absolutely agree. Although I do believe that the Republican party is manipulating public opinion in order to get lower income people to support policies that I believe are against their own interests. There is just overwhelming evidence in this regard. There is public opinion research in which people are just plainly confused about both the positions that the candidates take, as well as the state of the economy.

        However, there are many intelligent lower income people who know what the policies are and honestly believe that these policies are *not* against their own interests. They are not dupes at all.

        And to be fair, their is public manipulation occurring in the democratic party as well. I think the republican party is just better at it.

        Zanon — I have no idea what you are talking about. 400,000 bus drivers? Homophobic slurs? Defecation?

        We were talking about how political parties manipulate public opinion, and I was backtracking in front of ESM, trying to subtract away the ridicule and determine how of much substance remained.

      8. RSJ:

        I am talking about my wonderful city San Francisco, the most Progressive City in the Most Progressive State in the US.

        Our Muni Bus driveres, when they are not driving over elderly asian ladys make $400K a year. “tea bagger” is homophobic slur that you can look up yourself. And we recent laws enabling bums, of which we have many, to defecate in doorways without problems.

        my points is that those idiots in kansas, whom you and toms hickey look down upon, know that their isolated rural communities, with poor job prospect, cannot withstand the lousy governance that comes with Progressive policy and the damage welfare state does to social norms. Moynihan, a left winger you loves, knew this was double edged sword.

        but no. instead of contemplating the possibility that ignorant hicks are not so ignorant at all, you instead make them dupes of Republican party. this is the profound ignorance and arrogance i see in “what’s matter with kansas”.

        I am not liking writing this as it has nothing to do with MMT. even worse, I worry that people may think I am republican or that i share any fellow feeling with people of kansas, and i assure you i am not, and i do nots. but even i, who believe the soddam and gamorrah that is modern day california is preferable to kansas, can at least see why people there think what they do and do not put them in category of “idiot” or “dupe”. although i do believe they are not very bright and very manipulated — just not in the way you think. quites opposite in facts.

  10. Warren I really like what you say about non monetary societies. I watch star trek and stargate atlantis when I am not picking strawberries and it seems to me they get along just fine without monetary systems. The governments and societies have advanced enough that monetary systems just aren’t really necessary anymore.

    If you give people a minimum level of living, I bet amazing technological revolutions will come about and advance all our living standards. There will probably be automated robots in that society to pick our strawberries and no humans will ever have to do that back breaking work again. There is no reason that all 7 billion humans shouldn’t have laptops and internet access so that they can read your blog, we have the technology. As more humans come into the internet age, I see good things happening in our future. 100 years ago how would a lowly slave strawberry picker have daily discussions with some of the greatest economic minds on the planet?

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