Nice post. I agree that by leveraging the tools the current US monetary system has, creating currency is technically a feasible way to effectively eliminate the commitments (outstanding Treasuries as you call them) and get rid of the debt ceiling debate. The questions/concerns I have about this are, 1. Would this not cause inflation if we aren't able to tax an equivalent amount of money out? (which will be politically infeasible IMO), 2. Wouldn't this drastically centralize control of investment because one entity can create money and spend it where they see fit? I get that hypothetically investment targets would be subject to voters... but that's not reality today. This feels undemocratic to me. 3.
Let me address the second question firstly. This process is already centralized and controlled by The Federal Reserve. The are the entity that our government allows to create money out of thin air. It is Congress who is the only (theoretically) part of our government that regulates where that money is to be spent. I say theoretically due to the fact that this has not actually been the true practice of how our government has been doing things as it is outline in FRA 13. I get into a bit more detail on this issue on another previous podcast “Power and Corruption FED Style”. My friend and film producer Patrick Lovell are working on more investigative reporting on this issue as we speak and he is to be producing another film based on this issue specifically. But, in theory, Congress makes the decisions as to where and how that new money will be infiltrated into the global money supply chain.
This brings me to answer your first question. Yes it could cause inflation. However, it is the duty of our Congress to tax ALL citizens and corporations appropriately as to reduce the amount of outstanding currency “assets” that are out in the global monetary supply chain. What our Congress continually fails to do is their job in this regard. They don’t seem to understand that the money in the supply chain is an asset and not a debt. As you study more of the modern monetary theory scholars you can begin to understand that the PR machine of our government has become quite adept at misrepresenting how the process works in order to keep more money in the pockets of the rich and corporations that they do to their average voting constituent. This is primarily due to their lack of monetary policy education and Citizen’s United, which gives the rich and corporations the power to give extreme amounts of money to politician’s campaign coffers therein creating a detrimental cycle of greed that perpetuates a need for politician’s to never understand the true process of our monetary policy and its relation to “debt” v assets as it pertains to the global supply chain.
Appreciate the response. I agree with your perspective that given the current system, Congress is the entity responsible for taxing enough money out to ensure inflationary pressures are mitigated, and are clearly failing. I also agree that the public reporting on these issues is brutal... They are still using the language associated with a non-fiat currency when that isn't reality; they are effectively analyzing a bicycle (hard currency economy) when in reality we're dealing with a car (fiat currency economy), so it's not useful. They still use the tax-then-spend framework rather than the actual spend-then-tax process. I'm still wrapping my head around the MMT view, but I'm having trouble getting over my sense that MMT (effectively our system since the 80s, just not explicitly referred to as such) centralizes "public" investment decision making and results in a less democratic system.
I’d like to hear how and when you feel we actually had a democratic system in place that would satisfy your views in this discussion. You reference to the 80’s, I disagree with, and would change that to 1974 when Nixon removed the currency from the gold standard.
Agree that the de-pegging from gold is the reason, we just didn't quite realize what this meant for monetary policy for a little bit. I guess the way I'd put it is that when there is a commodity backed currency, it creates a natural check on public spending, which is MORE (not entirely) democratic than having unmitigated spending then taxing (not enough) it out arbitrarily after the fact. There is more accountability when using a hard money, so that is when I felt like it was more democratic. I think true democracy is infeasible, but a struggle towards it is usually prudent. I'm torn between thinking the best way forward is to try and return to a commodity (or quasi-commodity) standard, or to lean into the MMT model and try to make it more citizen centric than it is today. My concern with MMT is that greed/individual incentive is impossible to overcome, so a debaseable money, especially when issuance is centralized will always be taken advantage of. The resulting Cantillon effect is my main concern and what I view as driver of inequality since '74.
I agree with you on the commodity backed issue and public spending. But this just shows how far we are as a society and our relationship with capitalism. I agree with prudence. I also am leery of the Catillon effect. Between Locke, Catillon and Adams there is much for Congress to learn from. Our society just had a difficult time finding people for office that have an education or even desire to have one on the actual issues necessary to do the job. I do believe that Adams has been generally overused and misused by the mass media and government PR machine in its means of misquoting to make points. Greed will never cease while we are using a capitalist means of an economic engine. They go hand in hand. The true economic paradigm either needs to be fully understood by all of the decision makers, or we need to start over. It seems much easier, as a society and our history as a species, to simply start over.
Nice post. I agree that by leveraging the tools the current US monetary system has, creating currency is technically a feasible way to effectively eliminate the commitments (outstanding Treasuries as you call them) and get rid of the debt ceiling debate. The questions/concerns I have about this are, 1. Would this not cause inflation if we aren't able to tax an equivalent amount of money out? (which will be politically infeasible IMO), 2. Wouldn't this drastically centralize control of investment because one entity can create money and spend it where they see fit? I get that hypothetically investment targets would be subject to voters... but that's not reality today. This feels undemocratic to me. 3.
Let me address the second question firstly. This process is already centralized and controlled by The Federal Reserve. The are the entity that our government allows to create money out of thin air. It is Congress who is the only (theoretically) part of our government that regulates where that money is to be spent. I say theoretically due to the fact that this has not actually been the true practice of how our government has been doing things as it is outline in FRA 13. I get into a bit more detail on this issue on another previous podcast “Power and Corruption FED Style”. My friend and film producer Patrick Lovell are working on more investigative reporting on this issue as we speak and he is to be producing another film based on this issue specifically. But, in theory, Congress makes the decisions as to where and how that new money will be infiltrated into the global money supply chain.
This brings me to answer your first question. Yes it could cause inflation. However, it is the duty of our Congress to tax ALL citizens and corporations appropriately as to reduce the amount of outstanding currency “assets” that are out in the global monetary supply chain. What our Congress continually fails to do is their job in this regard. They don’t seem to understand that the money in the supply chain is an asset and not a debt. As you study more of the modern monetary theory scholars you can begin to understand that the PR machine of our government has become quite adept at misrepresenting how the process works in order to keep more money in the pockets of the rich and corporations that they do to their average voting constituent. This is primarily due to their lack of monetary policy education and Citizen’s United, which gives the rich and corporations the power to give extreme amounts of money to politician’s campaign coffers therein creating a detrimental cycle of greed that perpetuates a need for politician’s to never understand the true process of our monetary policy and its relation to “debt” v assets as it pertains to the global supply chain.
Appreciate the response. I agree with your perspective that given the current system, Congress is the entity responsible for taxing enough money out to ensure inflationary pressures are mitigated, and are clearly failing. I also agree that the public reporting on these issues is brutal... They are still using the language associated with a non-fiat currency when that isn't reality; they are effectively analyzing a bicycle (hard currency economy) when in reality we're dealing with a car (fiat currency economy), so it's not useful. They still use the tax-then-spend framework rather than the actual spend-then-tax process. I'm still wrapping my head around the MMT view, but I'm having trouble getting over my sense that MMT (effectively our system since the 80s, just not explicitly referred to as such) centralizes "public" investment decision making and results in a less democratic system.
I’d like to hear how and when you feel we actually had a democratic system in place that would satisfy your views in this discussion. You reference to the 80’s, I disagree with, and would change that to 1974 when Nixon removed the currency from the gold standard.
Agree that the de-pegging from gold is the reason, we just didn't quite realize what this meant for monetary policy for a little bit. I guess the way I'd put it is that when there is a commodity backed currency, it creates a natural check on public spending, which is MORE (not entirely) democratic than having unmitigated spending then taxing (not enough) it out arbitrarily after the fact. There is more accountability when using a hard money, so that is when I felt like it was more democratic. I think true democracy is infeasible, but a struggle towards it is usually prudent. I'm torn between thinking the best way forward is to try and return to a commodity (or quasi-commodity) standard, or to lean into the MMT model and try to make it more citizen centric than it is today. My concern with MMT is that greed/individual incentive is impossible to overcome, so a debaseable money, especially when issuance is centralized will always be taken advantage of. The resulting Cantillon effect is my main concern and what I view as driver of inequality since '74.
I agree with you on the commodity backed issue and public spending. But this just shows how far we are as a society and our relationship with capitalism. I agree with prudence. I also am leery of the Catillon effect. Between Locke, Catillon and Adams there is much for Congress to learn from. Our society just had a difficult time finding people for office that have an education or even desire to have one on the actual issues necessary to do the job. I do believe that Adams has been generally overused and misused by the mass media and government PR machine in its means of misquoting to make points. Greed will never cease while we are using a capitalist means of an economic engine. They go hand in hand. The true economic paradigm either needs to be fully understood by all of the decision makers, or we need to start over. It seems much easier, as a society and our history as a species, to simply start over.
I'll check out your pod and look forward to seeing your friend's film
Check it out. Also, check out Patrick’s latest critically acclaimed docu film series of 5 films called “The Con” at thecon.tv
I will be a part of his season two of this next series. It is going to be a blowout of information.