Bill on top of his game here:

16 Responses

  1. As Bill Mitchell stated money is in no way an issue, the real issue is real things like productivity. Why is this so hard to get across to people.

    I will never understand how all the attention is on “money.” It is easy to understand that people would think national debt is real debt, there are budget constraints etc. But if they simply listened to just their own arguments (sealed themselves off in a room and just listened to themselves) it seems it would dawn on some of them that their thinking is flawed.

    For example, most critics seem to agree that money is of no real value. They call it “funny money”, money with no real backing, money not worth the paper on which it is printed, etc. Yet while they denounce money as having no real value, everything else they advocate is completely centered around conserving money at the complete expense of wasting all the real things (labor, resources, economic capacity, etc.) Instead I would argue that the first rule of business is that you conserve what is scarce and waste what is plentiful, but as I described above, everyone has backasswards in regards to money and budgets.

  2. Of course, in lieu of tax cuts or increases in transfers the government could increase spending on current goods and services or even acquire existing real or financial assets. If the Treasury issued debt to purchase private assets and the Fed then purchased an equal amount of Treasury debt with newly created money, the whole operation would be the economic equivalent of direct open-market operations in private assets.’

    – B. Bernanke.

    1. @amanda knox,

      He lists a cause for deflation, but goes only 1 step up the causality chain, stopping with declining aggregate demand. He shows no interest in differentiating branch points above that level where control options would also fall under the Fed’s domain. No mention of bank regulation or fraud in any form whatsoever.

      ps: he also reveals his thinking in a footnote;
      “However, a pledge by the Fed to keep the Treasury’s borrowing costs low, as would be the case under my preferred alternative of fixing portions of the Treasury yield curve, might increase the willingness of the fiscal authorities to cut taxes.”

      Seems both contradictory with his prior statements about open-market operations, and out of paradigm with existing monetary operations.

  3. To all MMT followers (including myself):

    OK, so deficit spending is the way out in the US now. But that should not help much if the newly thus printed money does not stay and does not circulate within the US economy.

    The US Gov’t can print money and pay an American unemployed; but if he/she takes the money and buys an i-pad made in China, it seems that the effort has been quite diluted.

    Something besides deficit spending seems to be needed… What can MMT do about it?

    1. @lula silva, This is a fallacious argument. Right now, about 3-4% of GDP goes to exports. Assuming the proportion of deficit spending is the same, then only $40 B out of $1 T in deficit spending leaks to exports. More goes to savings, about $60 B. So 90% of a deficit stimulus doesn’t leak, but feeds into a fiscal multiplier. much more important than the worry about leakage to exports is the question of how the money is spent. If the deficit goes to tax cuts for the rich, then we’re looking at only a .35 primary multiplier. On the other hand if it goes to food stamps or Federal Job Guarantees it would be more like $1.50 to $1,70 for every deficit dollar.

      1. leaking to exporting nations is a good thing- means taxes can be that much lower for a given size govt

        and likewise low multiple is best. if tax cuts don’t get spent it means they can be that much larger, or spending that much more, depending on your politics.


      2. @WARREN MOSLER,
        I never quite followed this argument, and it causes me problems when it comes up when I’m trying to explain MMT at cocktail parties. Aren’t those foreign held dollars claims on future U.S. production? Eventually they will be used to take real goods and services away, no?

      3. @WARREN MOSLER,


        “Aren’t those foreign held dollars claims on future U.S. production?”

        Yes, indirectly, although they are claims of variable value, i.e. there is no guarantee of anything tangible. For example, if you were to make a car, sell it for dollars, hold the dollars for a while, and then try to use those dollars (plus interest) to buy a car, there is no guarantee that you would be able to get in exchange a car that was as good as the one you originally sold.

        “Eventually they will be used to take real goods and services away, no?”

        1) Not necessarily. The absolute number of dollars held by foreigners may continue to increase indefinitely. In fact, this is my expectation;

        2) As referred to above, the real goods and services commanded by those dollars may be significantly less valuable than what was exchanged for those dollars in the first place (especially when taking into account any productive uses to which those original goods and services were put). Japan has been net shipping millions of high quality cars to the US annually for over 30 years and yet what do they have to show for it? And those cars have made Americans much more productive;

        3) Further to point (2), it is always possible after the fact to put in place export controls or tariffs if foreign export demand is putting a strain on the domestic economy;

        4) Perhaps most importantly, when foreigners do want to spend their dollars finally, people here will consider it a good thing because we’ll all be working hard and making lots of money. We’ll have full employment, rising wages, and politicians will be crowing about how competitive the US is. We’ll be too busy to notice that we’re getting a raw deal, just like the Japanese and Chinese today.

  4. “The US Gov’t can print money and pay an American unemployed; but if he/she takes the money and buys an i-pad made in China, it seems that the effort has been quite diluted.”

    How can the effort be diluted when it costs nothing? If the leakage to savings is deemed too great you increase the flow of funds until the net real effect is as you want.

    The only way that an import can happen is if it is matched with an export or if a foreign entity decides to purchase US assets – financial or real. The import simply can’t happen otherwise.

      1. @MamMoTh,

        That’s a statement of belief again.

        It clearly costs nothing to produce entries on a computer to offset other entries on a computer that are in the wrong place economically. It’s no more effort than moving a chess piece.

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