pitiful stupidity/ignorance of monetary operations.

Very good post/critique by Bill on same goes into more detail:


On Thu, Dec 23, 2010 at 10:55 AM, Scott Fullwiler wrote:


Kucinich wants to end “private money creation” by banks or anyone else.

“Sec. 102. Unlawful for Persons to Create Money.
Any person who creates or originates United States money by lending against deposits, through so-called fractional reserve banking, or by any other means, after the effective date shall be fined under Title 18, United States Code, imprisoned for not more than 5 years, or both.”

9 Responses

  1. Warren, Ralph, Tom, etc…

    I read the critique of the Kucinich Bill at Billy Blog. I agree with the analysis that the crisis we are facing is political, and that there is a general misunderstanding of how money works in a fiat currency system. The “misunderstanding” is, in my opinion however, not a misunderstanding at all: rather it is a perversion of reality based upon the extraordinarily powerful forces of herding behavior and human irrationality. You can explain what is really happening (reality!) to an individual until you are blue in the face, but if said individual is utterly blinded by illusion and dissonant thinking, all of your efforts will be for nothing.

    I am reminded of the Star Trek episode (original series) in which the Enterprise goes to “Sandoval’s” planet to check on the crew of a research vessel that landed there three years ago. When they arrive, they find that the research party is fine, but that, due to the intoxicating effects of a plant on the planet, NO research has taken place. AND, any attempt by the Enterprise crew to convince the researchers that they have wasted three years doing nothing is met with first light-hearted rebukes, and later staunch and belligerent rejection. At the end of the episode, Sandoval’s crew is awakened from their somnambulance, and they are horrified at what has happened, and what has NOT happened, during their three years of Unreal thinking.

    There is so much anger and so much fear and so much mistrust today. The herd is unwilling to hear anything that challenges their anger or that asks them to consider solutions that involve taking at least a small leap of faith vis-a-vis their understanding of money and of debt, etc.

    NOW, that said…Billy and Warren (apparently) differ on the employment solution, as Billy calls for the government providing government jobs with a “livable” wage, whereas Warren calls for an $8/hour wage for such jobs. This is a critical distinction, because we need to be careful as we define what constitutes a livable wage. There are tens of millions of Americans living in poverty. Poverty, as Gandhi said, “…is the worst form of violence…”. The answer to poverty is NOT, in my opinion, monetary, but skill-oriented. When people employ local skills and are able to nurture comfortable subsistence and local economies, their “income’ becomes a secondary issue. They have food, shelter, community, etc.

    I know that Warren sees our consumptive economy as being a good thing. I remember clearly, during one interaction, Warren asking me “…what is so bad about consumption?!…” The problem with being the world’s consumer, among other things, is that such a model create a new type of poverty for the “masses”. Millions upon millions of citizens lose touch with their local, productive skill-base. These people become reliant upon spending and mass production and government subsidy in order to survive. The spirit is thus robbed of one of the cornerstones of the healthy human condition: that of feeling, and being, productive.

    My question for Billy and Warren (etc.) is this:

    How does MMT approach the issue of poverty, both from a fiscal and from a systemic and holistic view? How would implementation of some of the tenets of MMT not only lower unemployment levels, but also help nurture a national spirit of wealth…regardless of the size of the bank accounts of the citizens in question.

    1. Dan,

      For instance should not the JG wage be at least as much as full social security payments? IOW shouldnt someone working be making at least as much as (I say more than) someone not working?

      BTW I assume WM is open to suggestions on the $8/hr. as well as the 35 mph speed limit 🙂 as long as there is progress…


      1. right. my suggestion is to begin with the $8 wage because it’s non disruptive. the point isn’t to jump in and hire millions of people away from the private sector. I see the JG in continuous flux, as a liquid labor buffer stock that can provide a currency anchor utilizing a much lower % of the labor force than unemployment attempts to do (and fails miserably on all counts).

        And if the public sector wants more ‘real’ employees it should just go ahead and hire them.

        second, I combine it with my payroll tax (FICA) suspension which makes JG a transition job to private sector employment as aggregate demand expands and pays up to hire people away from the jg pool

        third, real benefits- health care, child care, vacation, etc. can be introduced from the ‘bottom up’ by including them with the $8/hr job if desired.

        fourth, in theory the $8/hr wage is the currency monopolist ‘defining’ the value of the currency, and as such is just a numeraire that all other prices adjust to in a competitive market economy (Yes, I know we don’t have that, but that’s another story). So that means a higher wage is ‘pure’ inflation- the act of redefining the currency downward.

        see ‘full employment and price stability’ on this website for more detail on all.


      2. Matt,

        Maximum Social Security retirement benefit is $28,152 a year (so $14.08 an hour), the average for SS retirement benefit is $14,000 ($7.000 an hr). A crummy deal because Medicare Part B (doctor) & Part D (drugs) premiums deduct roughly $1800 a year. To look at it another way, if Congress stopped collecting the $60 billion in Part B & D premiums, it’d be the equivalent to a 15% increase in benefits for the average recipient.

        Federal minimum wage is $7.25 an hour. As for highest state minimum wage, next month Washington State goes to $8.67 an hour (which is almost precisely 10% of what congressmen earn).

      1. @ Tom

        You are a smart man. I enjoy reading your thoughts. You combine a clear monetary acumen with a belief in doing “the right thing” for people, and I personally appreciate that commitment.

        RE: “…Over-supply and under-demand should be pretty simple to fix through better distribution…”

        Not sure I totally agree on this one. Distribution and allocation are very much under the control of the very TBTF corporations that need to be dismantled. Governments will need to take up the cause of distribution of goods, but national self-interest and chauvinism will, IMO, make this “simple fix” far from simple.

        RE: “…in the age of giant corporations that dominant markets, transcend national boundaries, subvert the political process, and suborn officials. These entities are monopolistic and anti-competitive, and need to be broken up…’

        Agreed. In fact, I feel the same way about the nation-state. I support, for example, the idea of an independent Vermont (my home state). The nation-state has in many ways outlived it utility vis-a-vis the public interest. Since the nation-state is now controlled by the financial oligarchy, the only way to break up the big corporations effectively is to take away their source of nourishment. Small, local, self-sustaining communities are to the TBTFs (and thus by extension to the nation-state) as Kryptonite is to Superman.

        RE: “…There also needs to be an operational approach to the global financial system that is not based on mercantilism but rather on everyone doing well. Because of asymmetries, this can only happen through cooperation and coordination instead of relying chiefly on competition…”

        Agreed again, to an extent. This can also be accomplished through supporting the re-teaching, re-learning and support of local skills in every village, the world over. In fact, any community can thrive if its local skills—those that promote the growth and harvesting of ample food sources, the creation and maintenance of adequate shelter and housing, and all of the ancillary skills that make life “better” for the local folks—are enhanced and nurtured.

      2. Dan, we are on the same page here.

        I strongly subscribe to the principle of subsidiarity, which states the decision-making should be kept as close to the level of the people involved as possible.

        My own conclusion “back in the Sixties” was that local life-support networks were the way to go in order to achieve self sufficiency. Now local networks have an accessible global medium in the WWW to create larger networks and, indeed, a global network.

        Things like open source are expressions of the network approach to dealing with centralization and concentrated power. The WikiLeaks affair and the response of anonymous are indications that the counter-revolution is still alive and well.

        The co-op movement has expanded greatly since the ’60s too. Micro-finance and peer to peer are also decentralized approaches that are becoming influential, as well as NGO’s and nonprofits.

        However, the WW and now social networking have advanced the process in ways that were undreamt of in the 60’s and 70s. The coming revolution in the way that media content is distributed is going to be transformational, and the social results cannot be readily anticipated at this point, since this is breaking new ground. Moreover, we have generations coming online that are primarily digitally oriented and educated, and have loose ties to traditional media.

        Mike Whalen, brother of IRA Analyst’s Chris Whalen, is a media expert. Here are couple of must-read articles about what he sees on the immediate horizon.

        Apple, Google, NewsCorp and the Future of Content: Interview with Michael Whalen

        The Future is Streaming Content

        This is going to put content much more in the hands of the people rather than top down through a few outlets. Contagion through social networking not placement and promotion by those that control the lever of power in traditional media will decide what roolz.

        This will change everything that is consumed, including news. It will also change the way education is structured and delivered. Traditional education is on the way out, too. Universities like MIT are already putting their courses online now.

        We are just scratching the surface. Exciting times. Lots of positive developments offsetting the considerable negative challenges. My feeling is that the megalithic corporations are, well, megaliths. It’s doubtful they can adapt quickly enough to fast-changing circumstances to maintain control. In this respect, they are paper tigers and social innovation is going to put a match to them.

    2. Danw, Re poverty, I don’t think MMT is primarily concerned with poverty. It’s concerned mainly with matters monetary, which might sound harsh. But given a logical monetary policy, that helps alleviate poverty. In fact if a “logical monetary policy” had resulted in a credit crunch of negligible proportions, the total amount of poverty avoided over the last two years would have been of astronomic proportions.

      Also I don’t regard JG as an essential part of MMT. JG type schemes can perfectly well be set up in a non MMT environment. Indeed, hundreds of what might losely be called JG type schemes have been set up over the centuries: the work houses of two or three hundred years ago, plus in the U.K. over the last thirty years we’ve had dozens of “make work” schemes: each one about as fatuous as the previous ones! Anyway, we’ll carry on trying.

      1. it’s a ‘knowledge is power’ thing

        if you are inclined to lean towards eliminating poverty, disease, etc. MMT reveals options the mainstream can’t even consider, such as JG

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