Modern monetary theory 

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 MG 03 Mar 2021

Is it

a) A load of bollocks to justify infinite spending which will come back to bite us.

 b) Correct, meaning we can keep spending on stuff almost indefinitely providing there is still unemployment. 

c) A useful perspective on economics when moderated with other lines of thinking 

4
 Shani 03 Mar 2021
In reply to MG:

"B)" is not MMT. MMT specifies very real constraints on how much can be created.

OP MG 03 Mar 2021
In reply to Shani:

The key one being unemployment, as I noted.

2
 Andy Hardy 03 Mar 2021
In reply to MG:

The probability of guessing the correct answer to this question is:

a) 0.25

b) 0.5

c) 0.25

d) none of the above

 Shani 03 Mar 2021
In reply to MG:

Yeah, employment levels are a key one but i was thinking more of inflationary measures. To quote Stephanie Kelton, 

"Do I believe the solution to all our problems is to simply spend more money? No, of course not. Just because there are no financial constraints on the federal budget doesn’t mean there aren’t real limits to what the government can (and should) do. Every economy has its own internal speed limit, regulated by the availability of our real productive resources—the state of technology and the quantity and quality of its land, workers, factories, machines, and other materials. If the government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate. There are limits. However, the limits are not in our government’s ability to spend money, or in the deficit, but in inflationary pressures and resources within the real economy. MMT distinguishes the real limits from delusional and unnecessary self-imposed constraints."

 Shani 03 Mar 2021
In reply to MG:

> The key one being unemployment, as I noted.

Apologies MG, I was in between bouldering sets and slightly conflated A and B above. Sorry if my response came  across as abrupt!

OP MG 03 Mar 2021
In reply to Shani:

No worries 👍

 pavelk 03 Mar 2021
In reply to MG:

Some people in Central Africa I've meet really belive it. They call it magic money tree usually

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 Shani 03 Mar 2021
In reply to pavelk:

> Some people in Central Africa I've meet really belive it. They call it magic money tree usually

Yep, we shook it for the bankers in 2008 to the tune of £435bn and there was no rampant inflation despite dire warnings in the media and some Tory blowhards - in fact for much of the decade, and even now, economic pressures are deflationary whilst the UK's national debt  has grown to £2.1tn. Economic ideology pre 2010 is increasingly redundant. 

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 DancingOnRock 04 Mar 2021
In reply to Shani:

They didn’t shake any magic trees. They did something completely different. There are no magic money trees. 

4
 Shani 04 Mar 2021
In reply to DancingOnRock:

> They didn’t shake any magic trees. They did something completely different. There are no magic money trees. 

I was toying with the phrase, but creating money out of thin air is tantamount to magic.

 DancingOnRock 04 Mar 2021
In reply to Shani:

Short term borrowing or even very long term borrowing isn’t magic. You have to pay it back. 

7
 elsewhere 04 Mar 2021
In reply to DancingOnRock:

> Short term borrowing or even very long term borrowing isn’t magic. You have to pay it back. 

Quantative easing isn't borrowing - it's digital creation of money so it is closer to "magic money tree" than borrowing.

Post edited at 14:17
 Shani 04 Mar 2021
In reply to DancingOnRock:

> Short term borrowing or even very long term borrowing isn’t magic. You have to pay it back. 

Borrowing in a currency for which you are sole issuer is NOT the same as borrowing for a user of that currency. 

To illustrate this consider these two questions:

1. If you could pay of all your personal debt, would that broadly be a good thing?

2. If a country with a sovereign currency could pay off all its debt, would that broadly be a good thing?

Give me your answers and I'll share mine (along with my reasoning).

Post edited at 14:39
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 jimtitt 04 Mar 2021
In reply to DancingOnRock:

> Short term borrowing or even very long term borrowing isn’t magic. You have to pay it back. 


Only if it has a set redeem date, the UK volountarily redeemed a bond from 1720 in 2014 for example. They could have left it forever.

Post edited at 14:19
 DancingOnRock 04 Mar 2021
In reply to Shani:

I am not a government. I am a person. I have to service my debt AND redeem the loan before I get to a point in my life where I cannot service the debt. So in the case of my mortgage I need to pay it back before I retire. 
 

Governments can only borrow as much as they can afford to service the loan. And that loan could as someone has pointed out be for 1000 years.

The limit for the borrowing isn’t the principal borrowed and the length of time it has to be paid back for, it’s servicing of the loan that’s important. 
 

For my house, that’s a one off purchase that will last decades. I cannot go to the bank every year and buy another house unless I can service the additional debt. 
 

A magic money tree is a tree where you just keep picking the money off it and expect it to magically grow back. 

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 Shani 04 Mar 2021
In reply to DancingOnRock:

So it seems from your view that it is yes to both questions?

My view:

- paying off personal debt is brilliant. 

- paying off government debt woukd be terrible. It would pipe out all money, saving and pensions.

That last point is counterintuitive but government red ink is our black ink.

If you still don't believe me then consider that National Savings are counted as government debt. 

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 DancingOnRock 04 Mar 2021
In reply to Shani:

Government debt comes in different forms. 
 

Everyday debt that they use to pay public sector workers and build infrastructure is incurred and then paid down by tax revenue and general movement of the money within the economy. 
 

Massive one off payments like wars, rescuing the economy from collapse from ‘unforeseen’ (unplanned) costs are different. 
 

If you need to keep control of the former all the time. 
The latter requires one off strategies. 
 

I’d suggest they were too keen to pay of the 2008 debt too quickly. But I think we’ve learned that lesson now. 

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 Shani 04 Mar 2021
In reply to DancingOnRock:

But crucially, all debt in a sovereign currency is held by the currency issuer. The issuer has a monopoly on that currency.

They might sell that debt on the financial markets but they don't need to.

I guess where we disagree is the point that I'd argue governments don't tax to pay debt. This is the big misnomer.

Post edited at 15:34
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 DancingOnRock 04 Mar 2021
In reply to Shani:

I thought we disagreed about the magic money tree. 
 

We Tax to keep money moving round the system and to provide money for services. There’s no magic money tree, or at least you can’t use ‘free’ money to do that for very long. 

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 Shani 04 Mar 2021
In reply to DancingOnRock:

> I thought we disagreed about the magic money tree. 

Well in that respect, as a monopoly issuer of currency, there is no limit. It's electronic so you can create as big a number as your banking software can handle. But, this would screw your economy; as above there are real constraints.

> We Tax to keep money moving round the system and to provide money for services. There’s no magic money tree, or at least you can’t use ‘free’ money to do that for very long. 

We don't tax "to provide money for services". We create money for services. Length of time isn't really a constraint. You can use free money as long as there is slack productive capacity in your economy. Many UK debts have been rolled over for 100s of years. We inflate our way out of debt with growth and low inflation.

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 DancingOnRock 04 Mar 2021
In reply to Shani:

We only borrow to make up the shortfall between tax revenue and government spending. Borrow in a recession, greater tax revenue in a boom. 

2
 jimtitt 04 Mar 2021
In reply to DancingOnRock:

> I am not a government. I am a person. I have to service my debt AND redeem the loan before I get to a point in my life where I cannot service the debt. So in the case of my mortgage I need to pay it back before I retire. 

> Governments can only borrow as much as they can afford to service the loan. And that loan could as someone has pointed out be for 1000 years.

> The limit for the borrowing isn’t the principal borrowed and the length of time it has to be paid back for, it’s servicing of the loan that’s important. 

> For my house, that’s a one off purchase that will last decades. I cannot go to the bank every year and buy another house unless I can service the additional debt. 

> A magic money tree is a tree where you just keep picking the money off it and expect it to magically grow back. 


It's a bit more complicated than thinking like a small shopkeeper (or private person). The only debts a govermment MUST service are external ones which is what killed the Irish economy, luckily they were saved from bankrupcy because the ECB etc where able to borrow from themselves the same as the British government does. It takes a finely judged hand to decide whether you are screwing the external value of your "created" money but that's economics. In your thinking you are concentrating on servicing the loan and ignoring the asset, for governments the usual rules are related to the GDP but of course the actual assets are gigantic, what do you think the USA is worth in it's entirety?

 Shani 04 Mar 2021
In reply to DancingOnRock:

> We only borrow to make up the shortfall between tax revenue and government spending. Borrow in a recession, greater tax revenue in a boom. 

Can we borrow from 'ourselves' as a country with a Sovereign currency?

 DancingOnRock 04 Mar 2021
In reply to jimtitt:

>In your thinking you are concentrating on servicing the loan and ignoring the asset, for governments the usual rules are related to the GDP but of course the actual assets are gigantic, what do you think the USA is worth in it's entirety?

 

The asset is used to service the loan. 

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 Shani 04 Mar 2021
In reply to DancingOnRock:

> The asset is used to service the loan. 

The asset is the 'useful work' a country can do. The government creates a tax to be paid in a denomination on which it is monopoly issuer. It creates money/debt and spends it in to the economy. The only reason we want pounds and pence is because that is the denomination we HAVE to pay tax in. Otherwise, we could be paid in any other currency.

 squarepeg 04 Mar 2021
In reply to MG:

Who is the UK borrowing money from? 

 DancingOnRock 04 Mar 2021
In reply to Shani:

It’s also the infrastructure etc. 
 

The money is borrowed from anyone who wants to invest from whatever country they live in. They obviously have to exchange their currency to GBP to purchase the bond but where they live and whether they are an institution, a company or a private individual it doesn’t matter. 

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 The New NickB 04 Mar 2021
In reply to DancingOnRock:

What is the inherent value of a fiat currency?

It’s value isn’t linked to gold. It’s value is all about the promise of the issuer of the currency that the money has value. “We promise that this money is good enough to pay your taxes with”.

QE was just creating money. It didn’t lead to rampant inflation, the money issued was as good as any other issue.

I’m not totally convinced about MMT, but not creating new money to deal with the cost of Covid, seems very stupid to me, particularly when  other economies are doing just that. The US CARES Act is doing exactly that.

 Shani 04 Mar 2021
In reply to DancingOnRock:

> It’s also the infrastructure etc. 

> The money is borrowed from anyone who wants to invest from whatever country they live in. They obviously have to exchange their currency to GBP to purchase the bond

They have to convert their currency to GBP to buy the debt/bond. From whom do they buy GBP - currency traders? Where do they get GBP from? Who is the sole 'creator' of the GBP?

 DancingOnRock 04 Mar 2021
In reply to The New NickB:

>It’s value isn’t linked to gold. It’s value is all about the promise of the issuer of the currency that the money has value. “We promise that this money is good enough to pay your taxes with”.

 

The promise is that person A will provide goods or services to person B in exchange for it. Nothing to do with the issuer.

The thing about QE is that someone has to buy the bonds. It’s not just free money given out. Who has any money at the moment to buy these bonds? The government has to lend the money to itself in this situation. 

Post edited at 20:38
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 DancingOnRock 04 Mar 2021
In reply to Shani:

It doesn’t matter who creates it. As long as someone has an equivalent amount of foreign currency to exchange. 

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 AJM 04 Mar 2021
In reply to DancingOnRock:

> The thing about QE is that someone has to buy the bonds. It’s not just free money given out. Who has any money at the moment to buy these bonds? The government has to lend the money to itself in this situation. 

QE was a purchase of bonds by the bank of England, using freshly printed money. Noone out in the market had to buy, they had to sell.....

 Shani 04 Mar 2021
In reply to DancingOnRock:

> It doesn’t matter who creates it. As long as someone has an equivalent amount of foreign currency to exchange. 

But where do people get money from?Someone's has to issue it! It's naughty to make the money yourself!

Think of starting a game of Monday. Without the banker spending £1500 in to the game (or whatever it is), for each player, how could the game start?

Post edited at 20:55
 The New NickB 04 Mar 2021
In reply to DancingOnRock:

The very definition of Quantitive Easing is that the Central Bank buys the bonds. Creating money to buy the bonds and adding it to the economy.

 smbnji 04 Mar 2021
In reply to DancingOnRock:

Quantitative easing is literally a magic money tree.

  1. Government issues bonds
  2. Bank of England purchases bonds with created money
  3. Bank of England lets bonds reach maturity without selling to secondary market
  4. Treasury pays BoE bond value
  5. BoE returns the money (see https://www.thisismoney.co.uk/money/news/article-8801909/Free-money-Bank-En...
1
 Shani 04 Mar 2021
In reply to Shani:

> Can we borrow from 'ourselves' as a country with a Sovereign currency?

MMT insight is now making it in to mainstream media. 92% of the UK's COVID borrowing comes from the Bank of England. We are creating our own money. Governments need to balance economies, not 'the books'.

https://twitter.com/robertnpalmer/status/1367440706655158277

Post edited at 22:44
 Johntherock 05 Mar 2021
In reply to Shani:

It never ceases to astound me how people equate their household budgets with national economies - in countries that have sovereign monetary systems. Money is weird like that. For a massive percentage of geological time it never even existed...... even for a massive percentage of our existence on Earth. 2700 BC I make it - the first money as we know it.......

 Shani 05 Mar 2021
In reply to Johntherock:

> It never ceases to astound me how people equate their household budgets with national economies - in countries that have sovereign monetary systems. Money is weird like that. For a massive percentage of geological time it never even existed...... even for a massive percentage of our existence on Earth. 2700 BC I make it - the first money as we know it.......

I was much the same until shortly after 2008 when due to the crash things just didn't add up for me (pun intended), and i headed to the library. I still get confused by some bits but it *is* weird. My question above about paying back national debt wiping out all cash, pensions and savings illustrates this.

In the past decade the household budget analogy and payback themes have led to heated disagreement on UKC (Hi Summo).

Post edited at 08:20
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 summo 05 Mar 2021
In reply to Shani:

> In the past decade the household budget analogy and payback themes have led to heated disagreement on UKC (Hi Summo).

Yes you can print money forever, but if it was that easy why does the international credit rating matter, what happened with Greece etc.  ? 

2
 seankenny 05 Mar 2021
In reply to Shani:

> MMT insight is now making it in to mainstream media. 92% of the UK's COVID borrowing comes from the Bank of England. We are creating our own money. Governments need to balance economies, not 'the books'.

Can you explain to me why this insight is an “MMT insight” rather than a standard neo-classical or New Keynesian insight? After all, the BoE - who are doing the buying - are almost certainly using those frameworks rather than MMT.

OP MG 05 Mar 2021
In reply to summo:

Presumably the MMT answer is the didn't have their own  currency. Turkey might  be a better example of why things aren't so simple. There clearly are dangers with the idea but equally there is clearly something  missing from "classic" theory.

 summo 05 Mar 2021
In reply to MG:

Inflation is a massive risk and one that could sneak up on the uk quite soon. 

3
 Shani 05 Mar 2021
In reply to summo:

> Yes you can print money forever, but if it was that easy why does the international credit rating matter, what happened with Greece etc.  ? 

Hi Summo! 👋

Greece is an easy one. It has no Sovereign currency it can issue. To all intents and purposes it is a currency user.

And no, you can't print money forever. See my quote from Kelton above.

1
 Shani 05 Mar 2021
In reply to summo:

> Inflation is a massive risk and one that could sneak up on the uk quite soon. 

When? I mean we've printer hundreds of billions since 2008 and all pressures are deflationary. Bond yields are negative in real terms and have been for best part of a decade (ie people will PAY THE UK to hold its debt - which is like paying YOU for your mortgage!). Interest reates have been stuck at the zero lower bound for a decade.

You've been shouting 'inflation' for a decade and we've printed £100s of bn's since you first shouted it. We know the huge damage Austerity has caused (all mainstream economists now agree on this), but your position on money creation clearly aligns with Austerity. 

I'm not dismissing the risk of inflation, but i am curious as to what you think we should have done differently?

Post edited at 08:43
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 summo 05 Mar 2021
In reply to Shani:

> You've been shouting 'inflation' for a decade 

Nope.

Differently; The uk needs creeping change towards improving services etc through taxation, not borrowing. More debt has been the uk's answer to everything for too long. That's my view, you've got yours. Neither of us are right or wrong. 

4
 seankenny 05 Mar 2021
In reply to summo:

> Inflation is a massive risk and one that could sneak up on the uk quite soon. 

Can you put a number on what would count as high inflation? And can you explain why it couldn’t be dealt with by increasing interest rates? 

 wbo2 05 Mar 2021
In reply to seankenny:  Because the fear is that it will kaibosh consumer based economies (UK as an example) by killing growth, and the high inflation rates make covering your high debts expensive.  On the upside it kills your historic debt so you need to keep a balance on it.

The answer to Greece is also perception.  If you're perceived as bad people then your debt is more expensive.  

Ultimtately you could go back to the gold standard, where rather than being magicked from thin air money actually was represented by gold, and all parts of the UK currency would be backed by a piece of something at the treasury.  The downside of this is that it's one reason economic growth was so slow for centuries, and as money becomes finite, and it tends to horde, inequality becomes very strong and all but a very few lose out.

I thought there was an MMR thread not so long ago?  The answer is C.  Ever heard of John Maynard Keynes?

 Shani 05 Mar 2021
In reply to seankenny:

> Can you explain to me why this insight is an “MMT insight” rather than a standard neo-classical or New Keynesian insight? After all, the BoE - who are doing the buying - are almost certainly using those frameworks rather than MMT.

Modern monetary theory (MMT) describes how money works in the modern economy. There's overlap with other models but i think growing public awareness of money creation and how 'borrowing can happen from ourselves', has been largely driven by MMT.

I'm only aware of MMT books topping the NY Times Bestsellers list in recent years (as opposed to neo-classical or New Keynesian texts), so I think it's fair to say it's from MMT this insight is being driven.

Listening to this reporter on BBC (see above), there's definitely a new found confidence around the narrative from WHERE we borrow, rather than the maxed-credit card fallacy. 

Post edited at 09:36
 summo 05 Mar 2021
In reply to seankenny:

> Can you put a number on what would count as high inflation? And can you explain why it couldn’t be dealt with by increasing interest rates? 

I think if it rose rapidly to even 5 or 7%, with corresponding interest rates there would be problems. Yes it's been higher and the  uk weathered it, but not in recent times and certainly when it was last 10% and beyond society had no where near the level of personal debt. 

Recovery from the last recession, which most of Europe had barely escaped, many were borderline recession just before covid, requires spending. Slow spending with high inflation, interest rates, personal debt pressure, repossessions... then growth after covid/the recession isn't very likely. 

2
 seankenny 05 Mar 2021
In reply to wbo2:

> Because the fear is that it will kaibosh consumer based economies (UK as an example) by killing growth, and the high inflation rates make covering your high debts expensive.  On the upside it kills your historic debt so you need to keep a balance on it.

But we’re talking about inflation occurring as a result of a government stimulus. And what do government stimuli do? They give a moribund economy some growth (in fact any economy, but ours happens to be moribund right now). So you would only raise interest rates if you had too much inflation, ie growing a little too quickly. 
 

> I thought there was an MMR thread not so long ago?  The answer is C.  Ever heard of John Maynard Keynes?

But in your first paragraph you were critical of a Keynesian approach for fear of inflation!

1
 seankenny 05 Mar 2021
In reply to summo:

> I think if it rose rapidly to even 5 or 7%, with corresponding interest rates there would be problems. Yes it's been higher and the  uk weathered it, but not in recent times and certainly when it was last 10% and beyond society had no where near the level of personal debt. 

How realistic do you think inflation at 5% really is? It’s not been that high for a decade.

 seankenny 05 Mar 2021
In reply to Shani:

So it’s all about public perception, and MMT doesn’t really tell us anything new? I’m talking about real insight rather than countering lies.

1
 Shani 05 Mar 2021
In reply to summo:

> Nope.

Ah yes, this looks like a candidate - 2015 vintage regarding Corbyn and O'Donnell's spending plans on large UK infrastructure projects.

https://www.ukhillwalking.com/forums/off_belay/jeremy_corbyn-624478?v=1#x81307...

 Shani 05 Mar 2021
In reply to seankenny:

> So it’s all about public perception, and MMT doesn’t really tell us anything new? I’m talking about real insight rather than countering lies.

I'm not sure that MMT fails to tell us anything new. It certainly makes a case for higher debt and contextualises the drivers of hyperinflation. But i don't really know enough about economics to assert either way.

 Jim Fraser 05 Mar 2021
In reply to summo:

> Inflation is a massive risk and one that could sneak up on the uk quite soon. 

No. 

At a time when banks in major economies have been trying for years or decades to stimulate their economies to point of moderate inflation, every time somebody wants to inject more money into an austerity-traumatised, under-financed, deep frozen economy, a million 'experts' start on about inflation risk and the Weimar republic and Venezuala of course get a mention. Those were special cases with unique internal and particularly external factors. That's not to say that the UK couldn't suffer hyper-inflation if the Government were run by someone who was completely insane. Huh?

1970s inflation was caused by the double hit of coming off the gold standard and oil price inflation: nobody knew how to cope with the new conditions and most politicians still don't. 

1
 seankenny 05 Mar 2021
In reply to Shani:

> I'm not sure that MMT fails to tell us anything new. It certainly makes a case for higher debt and contextualises the drivers of hyperinflation. But i don't really know enough about economics to assert either way.

As far as I understand it, MMT is a bit maths light so it confuses exactly what assumptions they make, causality, etc. Plus using fiscal policy to deal with inflation goes against our current methods of controlling it, ie through interest rates and also now QE.
 

I totally understand why it appeals after the failed austerity episode, which has been a disaster. That doesn’t mean I think we can borrow without limit, just that we are unsure of where those limits are. I strongly suspect they are higher than we’ve thought previously, ie I’m not that convinced about the risks of inflation at this point. 

 Shani 05 Mar 2021
In reply to seankenny:

> That doesn’t mean I think we can borrow without limit, just that we are unsure of where those limits are. I strongly suspect they are higher than we’ve thought previously, ie I’m not that convinced about the risks of inflation at this point. 

I broadly agree, but no model we mention suggests we can "borrow without limit" and it's a trope thrown at MMT.

 Jim Fraser 05 Mar 2021
In reply to MG:

I find it hard to believe so many people do not get this MMT thing. Considering how pathetically useless nearly every economic policy of the last 50 years has been one would think that most people would be looking out for something that explained the problems instead all the turkeys voting for Christmas YET AGAIN. 

As has been pointed out above and in other recent threads already,
1. The magic money tree does exist (never shaken to save ordinary folks from suffering and death but always shaken hard when we want to start a fkn war).
2. The National Debt isn't really a debt. 
3. Taxes do not pay for government spending.
4. In high value developed economies, poverty is made to exist for spite.

MMT is just the history of money. It's not a theory in somebody's academic paper that will wait several generations for proof that will never come. It is looking back at the last 300+ years of central bank operations and stating how they have worked and why. 

 kwoods 05 Mar 2021
In reply to MG:

And if anyone's looking for a primer, Warren Mosler's Seven Deadly Innocent Frauds would be a good place to go.

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

 The New NickB 05 Mar 2021
In reply to seankenny:

> How realistic do you think inflation at 5% really is? It’s not been that high for a decade.

It’s actually 30 years, last time inflation was above 5% was 1991.

 seankenny 05 Mar 2021
In reply to Jim Fraser:

> I find it hard to believe so many people do not get this MMT thing. Considering how pathetically useless nearly every economic policy of the last 50 years has been one would think that most people would be looking out for something that explained the problems instead all the turkeys voting for Christmas YET AGAIN. 

 

Is inflation a problem now? No. Have huge swathes of the world seen an increase in their standard of living? Yes. Did we deal with 2008 way, way better than 1929? Yes. Has the U.K. moved to less carbon intensive energy production via clever use of the markets? Yes (as I understand it).

Did we see the crisis coming? No, and that was a failure. Could we have resisted the huge political power of the finance sector if we had? Who can say...

> 1. The magic money tree does exist (never shaken to save ordinary folks from suffering and death but always shaken hard when we want to start a fkn war).

Apart from covid, no? (I’m not a Tory, btw).

> 3. Taxes do not pay for government spending.

So what do taxes pay for? And why do counties with a limited tax base tend to spend less?

> 4. In high value developed economies, poverty is made to exist for spite.

Sometimes yes, sometimes it’s hard to solve. As a rhetorical device aimed at alleviating poverty this is next to useless.

> MMT is just the history of money. It's not a theory in somebody's academic paper that will wait several generations for proof that will never come. It is looking back at the last 300+ years of central bank operations and stating how they have worked and why. 

I’m guessing you’ve not read an economics paper because they are usually fairly heavy on data and empirics. If MMT is just a history then how can we use it as a policy making tool? How can MMT tell us “what’s worked and why” whereas mainstream economics will never have “proof”, because to me proof and what works and why sound awfully similar. 

 seankenny 05 Mar 2021
In reply to The New NickB:

> It’s actually 30 years, last time inflation was above 5% was 1991.

Indeed, I misread a chart. A small spike after the crash. It’s almost like we know what to about inflation and it’s not a massive problem.

 Shani 05 Mar 2021
In reply to seankenny:

> what do taxes pay for? And why do counties with a limited tax base tend to spend less?

In MMT, taxes pay for nothing (certainly not in the Tax & Spend model we've been sold by media for the past decades), but are primarily used to:

1. Enable governments to provision themselves without the use of explicit force (tax arose from a need to get the general population to feed armies) 

2. Tax (destroying money) limits inflationary pressures of uncontrolled money creation 

3. Taxes are a powerful way for governments to alter the distribution of wealth and income

4. Taxes are used to change public behaviour (eg tax on cigarettes)

Post edited at 12:44
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 seankenny 05 Mar 2021
In reply to Shani:

Tax and spending as something for the last ten years? I’ve heard these two together for my whole life. Edit: sorry I see you say decades. But I can assure you it’s not a media invention. 
 

Aren’t 1 and 2 contradictory? A government wants to “provision itself”, ie buying goods and services. Milo Minderbinder sells the government some good and services, makes himself rich. The money has not disappeared. 
 

2 - as noted above, we are quite good at dealing with inflation, which we do mostly through monetary policy. Basically because inflation is about pricing decisions looking forward, which are strongly affected by interest rates, whereas fiscal policy tends to have strong real (rather than nominal) effects, as per your point 4. 

Points 3 and 4 are nothing to do with MMT I’m afraid. This only goes to highlight that what you perhaps want - more equitable distribution of income and wealth - can be achieved without MMT. Effectively you’re fighting your battles in the intellectual terrain chosen for you by your adversaries.

Post edited at 12:56
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 Shani 05 Mar 2021
In reply to seankenny:

> Tax and spending as something for the last ten years? I’ve heard these two together for my whole life. Edit: sorry I see you say decades. But I can assure you it’s not a media invention. 

> Aren’t 1 and 2 contradictory? A government wants to “provision itself”, ie buying goods and services. Milo Minderbinder sells the government some good and services, makes himself rich. The money has not disappeared. 

I'm not sure i understand. But the crucial point is that from a government's PoV taxes can only be paid in currency only they can issue (rather than asking for payment in gold, € or $). It gives them a lot of control. 

> 2 - as noted above, we are quite good at dealing with inflation, which we do mostly through monetary policy. Basically because inflation is about pricing decisions looking forward, which are strongly affected by interest rates, whereas fiscal policy tends to have strong real (rather than nominal) effects, as per your point 4. 

No consideration for velocity? Even in these deflationary times we see bubbles in art, for example. 

> Points 3 and 4 are nothing to do with MMT I’m afraid. This only goes to highlight that what you perhaps want - more equitable distribution of income and wealth - can be achieved without MMT. Effectively you’re fighting your battles in the intellectual terrain chosen for you by your adversaries.

I'm not making a claim they're exclusive to MMT but they're built in to the MMT world view of WHY we tax (Kelton explicitly states them).

Post edited at 13:14
 seankenny 05 Mar 2021
In reply to Shani:

> I'm not sure i understand. But the crucial point is that from a government's PoV taxes can only be paid in currency only they can issue (rather than asking for payment in gold, € or $). It gives them a lot of control. 

 

So you’re saying the govt absolutely cannot decide on an annual poll tax of $100, that we all have to pay in dollars? It would be stupid, but it could do it. 

Anyhow my point is that if I’m selling the government something - a tank, legal services, whatever - then it is spending money that I then use. That money is dependent on taxation (even if the government borrows to smooth its income). And that money certainly doesn’t “disappear”. If, as I suspect, you would like to see some government stimulus post-pandemic, you’d probably argue that there’d be a spending multiplier. That is money appearing a lot, rather than disappearing.

> No consideration for velocity? Even in these deflationary times we see bubbles in art, for example. 

 

But we don’t have deflation, we have low inflation. Getting bigger slowly rather than getting smaller. And yes, we have asset bubbles. But we still have a good handle on inflation. 

> I'm not making a claim they're exclusive to MMT but they're built in to the MMT world view of WHY we tax (Kelton explicitly states them).

1
 Shani 05 Mar 2021
In reply to seankenny:

> So you’re saying the govt absolutely cannot decide on an annual poll tax of $100, that we all have to pay in dollars? It would be stupid, but it could do it. 

It's not that they can't, its that you are asking for tax in a currency for which you are a user, not an issuer. Thus you undermine power in your own currency. This is what lead to hyperinflation in Weimar; the debts had to be paid to other countries in *their* sovereign currency.

> Anyhow my point is that if I’m selling the government something - a tank, legal services, whatever - then it is spending money that I then use. That money is dependent on taxation (even if the government borrows to smooth its income). And that money certainly doesn’t “disappear”. If, as I suspect, you would like to see some government stimulus post-pandemic, you’d probably argue that there’d be a spending multiplier. That is money appearing a lot, rather than disappearing.

If i understand you correctly (not guaranteed), then no, government spending doesn't require tax. On this point MMT is quite clear. (Apologies if i have missed your point).

EDIT: Just to add that at local government level, taxes DO matter and ARE needed to pay for goods and services.

> But we don’t have deflation, we have low inflation. Getting bigger slowly rather than getting smaller. And yes, we have asset bubbles. But we still have a good handle on inflation. 

Well, bond yields are negative. Inflation is incredibly and stubbornly low....but yes, we do have a good handle on inflation.

Post edited at 13:58
 AJM 05 Mar 2021
In reply to Shani:

> 1. Enable governments to provision themselves without the use of explicit force (tax arose from a need to get the general population to feed armies) 

Can you explain a bit more about what exactly you mean by “provision” here? Like Sean, I’m a little confused. I can think of two options - is either right? If not, what exactly do you mean?

1. You mean taxation in currency in order for the government to buy “provisions” - things it needs, in other words? If so, I’m a bit confused as I thought in MMT it was argued that the government just creates money to do that

2. You mean tax in kind (I.e. taxes payable by goods such as food) and are essentially referring to a historic and now largely redundant use for taxation since most governments now require taxes to be paid in currency which they either then use to pay for the things they need or which they just destroy on receipt, depending on your view of how these things work.

 Shani 05 Mar 2021
In reply to AJM:

Simply put, if you need to feed and clothe an army of 10000, it is a monumental job. So you have to get the people to do it for you.

If you demand people pay tax in a denomination only you can issue, and pay your army in that  currency, the 'people' will swap goods and services (bread, clothes, weapons), for that currency. 

This means your army gets fed, your people can pay their tax, and as a government you have two happy groups. If you could trade in 'any' currency or thing of value (gold pieces or dollars), the people would not NEED your currency and you'd be paying your army in worthless tokens.

 seankenny 05 Mar 2021
In reply to Shani:

> If i understand you correctly (not guaranteed), then no, government spending doesn't require tax. On this point MMT is quite clear. (Apologies if i have missed your point).

My point seems to have disappeared like you claim money does when I pay taxes.

Can you then tell me why the government originally introduced income tax at the same time as it wanted to undertake an expensive war with France? It’s almost like they had to fund some spending. Or why poor governments that struggle to collect taxes - consider how unregulated much of the economy is in India - tend not to spend as much as rich governments with better tax raising powers. 

> EDIT: Just to add that at local government level, taxes DO matter and ARE needed to pay for goods and services.

So what’s the difference between local government buying a Jag for the council leader and central govt buying a Jag for the PM? How does that work when, in the U.K., most local government spending is funded from the centre?

> Well, bond yields are negative. Inflation is incredibly and stubbornly low....but yes, we do have a good handle on inflation.

I think you’re mistaking understanding how something works and the political will to do the thing. We could, if we wanted, create hyperinflation without too much difficulty, but we don’t.

Anyhow, take a look at inflation since WW2. It’s much lower in the last 30 years, which suggests we have a better understanding of how to control it. That in turn suggests that our theories of inflation and how we apply those theories are okay-ish. MMT says those policies and theories are incorrect. Well, maybe.

 Shani 05 Mar 2021
In reply to seankenny:

> My point seems to have disappeared like you claim money does when I pay taxes.

> Can you then tell me why the government originally introduced income tax at the same time as it wanted to undertake an expensive war with France? It’s almost like they had to fund some spending. Or why poor governments that struggle to collect taxes - consider how unregulated much of the economy is in India - tend not to spend as much as rich governments with better tax raising powers. 

> So what’s the difference between local government buying a Jag for the council leader and central govt buying a Jag for the PM? How does that work when, in the U.K., most local government spending is funded from the centre?

Local government can't print it's own money. It is a currency user. You're confusing the local spending of office with money creation for things like national infrastructure projects. 

> Anyhow, take a look at inflation since WW2. It’s much lower in the last 30 years, which suggests we have a better understanding of how to control it. That in turn suggests that our theories of inflation and how we apply those theories are okay-ish. MMT says those policies and theories are incorrect. Well, maybe.

I'm not sure "MMT says those policies and theories are incorrect". In fact it explains why government debt is so benign at the moment; the break with the gold standard being pivotal.

 AJM 05 Mar 2021
In reply to Shani:

That sounds more like my first option than my second, I think? 

My understanding though was that MMT would say there needs to be no link between these two things. If you need to raise an army, you simply create money in order to buy the food, buy the weapons and pay the soldiers. The decision to tax or not is wholly independent of that, since the only reason you need to tax is to control inflation. In a low inflation world, you should just be able to provision an army by creating money to enable its provision.

As you said before the original list, taxes pay for nothing in MMT. So how can one of their main uses be to provision armies, where that’s defined as feeding and clothing them, which is by definition government spending money on things?

I don’t think the starting premise - taxes pay for nothing - and the first point - Taxes enable governments to provision armies - can possibly be consistent.

Also, I’m not sure what’s unique about provisioning an army, versus say rebuilding a city or constructing a tunnel - they’re both mammoth enterprises that require lots of stuff from “the people” to complete. Tax can’t be required for all major enterprises, otherwise this whole premise starts to feel rather limited.....

 DancingOnRock 05 Mar 2021
In reply to seankenny:

I understood the problem with inflation wasn’t at home it was the purchasing power of imports. If your currency is devaluing you can’t buy your imports. 
 

I’m not sure what Shani is on about when they are talking about currency. 
 

If you buy raw materials from France and sell the finished article to the US. You’ve made Dollars that you can either buy other things from the US or exchange with France for more Euros. 
 

The government takes some of the increased value to ensure there are services that enable the country to operate properly. 

I’m very confused with this idea of a finite amount of money. 

The whole idea of reducing the amount of money in circulation is to keep it scarce and its value high in relation to other countries. 

What am I missing? 
 

The government could just keep issuing itself money whenever it felt like it. But unrestricted it would devalue the currency and cause inflation. The fact it hasn’t shows it’s been done at a rate that the market can handle. 

Post edited at 15:07
2
 wbo2 05 Mar 2021
In reply to seankenny:

> But we’re talking about inflation occurring as a result of a government stimulus. And what do government stimuli do? They give a moribund economy some growth (in fact any economy, but ours happens to be moribund right now). So you would only raise interest rates if you had too much inflation, ie growing a little too quickly. 

I didn't say I necessarily agreed with such fears of inflation, and actually I don't .  Even if there was evidence of incipient inflation, and there isn't , it would be really easy to kill it.

> But in your first paragraph you were critical of a Keynesian approach for fear of inflation!

I'm very pro a Keynsian method.  Austerity proved a failure in the longer run (and the short and middle as well).  Somehow it managed to preserve old, zombie businesses and underpromote new explaining 10 years of crappy growth 2010 on

Post edited at 15:41
 Shani 05 Mar 2021
In reply to AJM:

Aha, i think i get you now. It was ambiguous to say "Taxes pay for nothing". What i meant was that for government to fund a project you don't need to FIRST raise the funds by a tax on the people and THEN buy what you need. This was the Thatcher narrative of "tax & spend".

You can "spend then tax". The order is important and at the crux of what i was trying to say.

Post edited at 16:12
 AJM 05 Mar 2021
In reply to Shani:

So, to come back to the point about armies - your point is that in order for your army and your suppliers to be happy receiving your currency as payment you need taxation there as the thing which creates a demand for your currency and effectively gives people a reason to value it?

Does that still work in a low inflation or deflationary environment? Hypothetically, there you don't need tax, right. Is it assumed that people take a long run view (understanding that at some point tax will be needed) and therefore continue to value the currency in the interim? 

It has to be said this argument feels easier if the taxation comes first, because you create the demand for the currency before you have to start persuading people your freshly printed money is a viable thing to exchange for labour or goods. But I suppose all this is maybe hypothetical anyway because society's inherited idea of money goes back to before the point where one could argue about whether it's being destroyed by taxation or not (as in, it's fairly obvious whether you're destroying a gold coin or not by collecting it as tax, so it's a short argument with an obvious answer...)

 Shani 05 Mar 2021
In reply to AJM:

> So, to come back to the point about armies - your point is that in order for your army and your suppliers to be happy receiving your currency as payment you need taxation there as the thing which creates a demand for your currency and effectively gives people a reason to value it?

Yes.

> Does that still work in a low inflation or deflationary environment? Hypothetically, there you don't need tax, right. Is it assumed that people take a long run view (understanding that at some point tax will be needed) and therefore continue to value the currency in the interim?

As long as we have to pay tax on anything in GBP, there will be a demand for GBP.

> It has to be said this argument feels easier if the taxation comes first, because you create the demand for the currency before you have to start persuading people your freshly printed money is a viable thing to exchange for labour or goods. But I suppose all this is maybe hypothetical anyway because society's inherited idea of money goes back to before the point where one could argue about whether it's being destroyed by taxation or not (as in, it's fairly obvious whether you're destroying a gold coin or not by collecting it as tax, so it's a short argument with an obvious answer...)

The interesting thing about gold coins is that if you were a king with an army, if you wanted gold you wouldn't bother with a tax, you'd just march off with your army and take control of the goldmines directly. Then you could have all the gold you wanted (as long as you dig for it).

But if you want people to do useful work for you, you need to issue a cheap bit of paper/coins only you can print/mint and demand THAT as the tax.

Tax is how the government gets us to do its bidding.

 AJM 05 Mar 2021
In reply to Shani:

That whole argument just boils down to having force though. Tax is just an abstraction.

Either you've got enough force to take control of a goldmine, or you've got enough force to demand taxes in gold (leaving someone else to sort out the problem of the goldmine - less risk to you, transfer the risk to someone else) or you've got enough force to be able to require pieces of paper to become currency (partly because you can imprison or otherwise punish people who won't pay taxes in them or who won't accept them as payment).

It's a lens through which to look at the world and to look at money, but I'm not sure it's the only one.

1
 Shani 05 Mar 2021
In reply to AJM:

> Either you've got enough force to take control of a goldmine, or you've got enough force to demand taxes in gold (leaving someone else to sort out the problem of the goldmine - less risk to you, transfer the risk to someone else) or you've got enough force to be able to require pieces of paper to become currency (partly because you can imprison or otherwise punish people who won't pay taxes in them or who won't accept them as payment).

The problem is that if you own all the gold in the land you still have to feed and feed/clothe your army. Why should a baker sell his bread to your hungry soldier when a Frenchman with more gold is willing to pay more for that same loaf?

This goes back to having a monopoly on issuing a currency. No one else can print GBP (but others can compete if you choose gold because you can't monopolise gold), and you can’t run out of GBP as you might with gold.

 AJM 05 Mar 2021
In reply to Shani:

I think this is going round in circles a bit now, if I'm honest. But my observation would be that if you're in a position to compel the baker to pay taxes in GBP, which incentivises him to sell you bread for GDP, then you're also in a position to compel him not to export his bread or to sell it preferentially to you (or just give it to you). Your argument is that a monopoly over currency issuance gives you this power - but you can only become a monopoly currency issuer of you have the ability to force that situation in the first place. The best you can argue is that tax provides an "acceptable face" to the whole thing. 

1
 Shani 05 Mar 2021
In reply to AJM:

> I think this is going round in circles a bit now, if I'm honest. But my observation would be that if you're in a position to compel the baker to pay taxes in GBP, which incentivises him to sell you bread for GDP, then you're also in a position to compel him not to export his bread or to sell it preferentially to you (or just give it to you). Your argument is that a monopoly over currency issuance gives you this power - but you can only become a monopoly currency issuer of you have the ability to force that situation in the first place. The best you can argue is that tax provides an "acceptable face" to the whole thing. 

It's not 'my argument' as such. It's how money came in to being (see David Graebers "Debt: The First 5000 Years"). The example of 'bread' was illustrative, but it really holds It's own when you think of £bn national infrastructure projects.

GBP is so embedded in our society we all desire it as our preferred currency(and given It's hard to spend a Scottish £5 note south of Watford you can imagine the resistance to accepting other currency). But there's no reason not to accept €, ¥ or BTC.

Weimar and Venezuela are the best examples as to why debt in a currency for which you are issuer is preferential to that which you are user.

But yeah, i think we've talked this one out.

Cheers.

 seankenny 05 Mar 2021
In reply to Shani:

> As long as we have to pay tax on anything in GBP, there will be a demand for GBP.

But there’s demand for dollars, euros and pounds by lots of people who don’t pay tax here. And there was demand for currency before governments really spent very much at all. Pre-modern government did not amount to much.

Plus you seem to forget that some countries use other people’s currency - dollarisation. 

> The interesting thing about gold coins is that if you were a king with an army, if you wanted gold you wouldn't bother with a tax, you'd just march off with your army and take control of the goldmines directly. Then you could have all the gold you wanted (as long as you dig for it).

We’ve been using gold in Britain for a long time. But where were the gold mines? 

Also this model rather ignores the fact that the reason for having money in the first place was “provisioning” but here you’ve assumed already the existence of a fully provisioned army. 
 

I’m also not sure where the existence of pan European money lenders who actually funded conflicts fits in to this story of monarchs taking money by force. I suspect -  but could be wrong - is that everyone who gets excited about money forgets real effects, ie the money sovereigns borrowed was real surplus capital produced in the real, not the financial, economy. 

> But if you want people to do useful work for you, you need to issue a cheap bit of paper/coins only you can print/mint and demand THAT as the tax.

Yet we’ve found Roman coins as far afield as China. I suspect people weren’t too fussy about the actual coins they used, as long as it was gold and they could exchange it for goods and services. Which they clearly could. Your point also avoids the small issue of feudalism which involved work without money - lords got useful work done for them without needing cash.

And again, this story ignores that there was money knocking around before much in the way of government activity. 
 

Whilst I’m not convinced that this story accurately describes pre or early modern societies, I’m even more at a loss to understand what relevance it has to the 21st century economy. 

1
 seankenny 05 Mar 2021
In reply to Shani:

> The problem is that if you own all the gold in the land you still have to feed and feed/clothe your army. Why should a baker sell his bread to your hungry soldier when a Frenchman with more gold is willing to pay more for that same loaf?

Because the bread will be stale by the time you’ve taken it to France. As for the other way around...

This is not quite the facetious point it may appear. 

 seankenny 05 Mar 2021
In reply to Shani:

> It's not 'my argument' as such. It's how money came in to being (see David Graebers "Debt: The First 5000 Years"). The example of 'bread' was illustrative, but it really holds It's own when you think of £bn national infrastructure projects.

Graeber is the name that always comes up in these threads. You do realise he got some basic facts about finance incorrect? And that he wasn’t actually an economist? 

> Weimar and Venezuela are the best examples as to why debt in a currency for which you are issuer is preferential to that which you are user.

I’m not sure it’s that simple, because plenty of counties use other currencies. I know you say you don’t know much economics, but you’re claiming you know more than national finance ministries. I’m not particularly up on the effects of this (not exactly my thing) but I suspect it’s a mixed bag and depends on a lot of factors. 
 

I can thoroughly recommend the CORE economics text book, free online and very readable, as a good basic primer to modern economic thought. It lacks the appeal of something that’s “outside the mainstream” that MMT has, but it does have the advantage of being backed by lots of empirical work. 

2
 Shani 05 Mar 2021
In reply to seankenny:

> But there’s demand for dollars, euros and pounds by lots of people who don’t pay tax here. And there was demand for currency before governments really spent very much at all. Pre-modern government did not amount to much.

I'm not disagreeing there's demand for other currencies. It's irrelevant. People WILL demand whichever currency they have to pay tax in.

> Plus you seem to forget that some countries use other people’s currency - dollarisation. 

Again, this is beside the point. We're talking about fiat currency in the context of MMT.

> We’ve been using gold in Britain for a long time. But where were the gold mines? 

You've grabbed the wrong end of the stick.  I'm trying to explain the move from money made from precious metals to fully fiat currency.

> Also this model rather ignores the fact that the reason for having money in the first place was “provisioning” but here you’ve assumed already the existence of a fully provisioned army. 

I'd recommend you read Graeber's book.

> I’m also not sure where the existence of pan European money lenders who actually funded conflicts fits in to this story of monarchs taking money by force. I suspect -  but could be wrong - is that everyone who gets excited about money forgets real effects, ie the money sovereigns borrowed was real surplus capital produced in the real, not the financial, economy. 

> Yet we’ve found Roman coins as far afield as China. I suspect people weren’t too fussy about the actual coins they used, as long as it was gold and they could exchange it for goods and services. Which they clearly could. Your point also avoids the small issue of feudalism which involved work without money - lords got useful work done for them without needing cash.

I think you are missing the point. If you read Graeber's book and Kelton's it'd explain things in a detail more accessibly than a forum exchange.

> And again, this story ignores that there was money knocking around before much in the way of government activity. 

Never in doubt. Rai stones are a great example. Irrelevant to being an issuer of fiat currency though.

> Whilst I’m not convinced that this story accurately describes pre or early modern societies, I’m even more at a loss to understand what relevance it has to the 21st century economy. 

Becsuse it's pivotal to understanding the power of being a currency issuer in MMT.

 Shani 05 Mar 2021
In reply to seankenny:

> Graeber is the name that always comes up in these threads. You do realise he got some basic facts about finance incorrect? And that he wasn’t actually an economist? 

Yes i know he wasn't an economist. Which bits about the evolution of money did he get wrong? I'm interested.

> I know you say you don’t know much economics, but you’re claiming you know more than national finance ministries.

Really, I'm not. 🤣

EDIT: Apart from George Osborne. 

> I can thoroughly recommend the CORE economics text book, free online and very readable, as a good basic primer to modern economic thought. It lacks the appeal of something that’s “outside the mainstream” that MMT has, but it does have the advantage of being backed by lots of empirical work. 

I'll take a look at it. Richard Murphy, Nathan Tankus and Oxford's Simon Wren-Lewis would be my recommendation to you (SW-L is not an MMT advocate!)

Post edited at 20:05
 seankenny 05 Mar 2021
In reply to Shani:

Obviously I’ve read Simon Wren-Lewis and Richard Murphy. My point being that this sounds like a lot of a-historical bumpf that has little to do with running a modern state. Did people demand to be paid in GBP if they lived in the U.K.? No shit Sherlock, yes they did. In the 19th century - way before we moved off the Gold Standard. 
 

I know I should read The Book - but that’s the point, it’s The Book. There’s always The Book. But proponents of The Book have usually only read The Book. Where’s the research, carefully backed up with some solid econometrics? And can you explain why an unconvincing story of “how money happened” means we should overthrow decades-worth of theory that we know can keep inflation down? 

2
 seankenny 05 Mar 2021
In reply to seankenny:

Just to add, apologies for the rather grumpy post. It’s just that suggesting a new way of doing things and backing that up with a discussion of how to pay for medieval armies seems somewhat... leftfield. If the answer to your problem is something produced by a handful of academics and loved by Jeremy Corbyn and co, maybe that’s a clue that it isn’t all that. Maybe problems are just hard to solve, and the instance that it would all be okay if only people read the book isn’t really the way to solve hard problems. 

1
 Shani 05 Mar 2021
In reply to seankenny:

> Just to add, apologies for the rather grumpy post. It’s just that suggesting a new way of doing things and backing that up with a discussion of how to pay for medieval armies seems somewhat... leftfield. If the answer to your problem is something produced by a handful of academics and loved by Jeremy Corbyn and co, maybe that’s a clue that it isn’t all that. Maybe problems are just hard to solve, and the instance that it would all be okay if only people read the book isn’t really the way to solve hard problems. 

No worries. I don't mind discussing these ideas. The MMT stuff has nothing to do with medieval armies per se. I was using it to illustrate the power of tax in a particular currency. Graeber's book isn't the only reference i could provide on this topic , but it's perhaps the most accessible I've read.

The Corbyn comment is wide of the mark because the finance side was engineered by Richard Murphy (who you said you've read).

I could name other economist i follow and read, but in trying to explain MMT over a forum you'll understand the inherent constraints. 

I guess time will tell if MMT is a good model. We should pick this thread up in a year or two.

Post edited at 23:08
1
 seankenny 06 Mar 2021
In reply to Shani:

Do feel free to suggest others. But also perhaps some stuff you’ve read that isn’t MMT? I’d honestly suggest engaging with some of the critiques of this theory, because surely one has to understand the orthodox before seeing why it needs to be overthrown?

Much of what you wrote is in contradiction of born common sense and basic political theory. Eg “tax is a governments way of making is do what we are told”. I mean, if you don’t pay tax, eventually someone will come to take your goods or put you in prison, and if you resist a big man will physically restrain you or hit you. Why? Because a state has a monopoly of violence in a territory. That’s what political power means. The power to tax comes from the state’s monopoly on legitimate force. Maybe David Graeber thought differently, but maybe he’s just another guy thrown up by the tumult of our times, like Jordan Petersen. Sex life of lobsters, anyone?  
 

As I’ve said before, I think you’re confusing what you see in the media or the political realm with things that might represent any actual understanding. Eg, no one thinks it’s “tax and then spend”, because it obvious debt financing occurs, regardless of what they may say in public. Noted morons like JRM and JC aside, clearly; such men are fools whose only talent is meeting the needs of other fools. 
 

I get the appeal of “money woo”. It’s much more exciting than asking dull technical questions like “what’s happening to the Phillips curve?” or whatever. 

2
 Shani 06 Mar 2021
In reply to seankenny:

> Do feel free to suggest others. But also perhaps some stuff you’ve read that isn’t MMT? I’d honestly suggest engaging with some of the critiques of this theory, because surely one has to understand the orthodox before seeing why it needs to be overthrown?

> Much of what you wrote is in contradiction of born common sense and basic political theory. Eg “tax is a governments way of making is do what we are told”. I mean, if you don’t pay tax, eventually someone will come to take your goods or put you in prison, and if you resist a big man will physically restrain you or hit you. Why? Because a state has a monopoly of violence in a territory. That’s what political power means. The power to tax comes from the state’s monopoly on legitimate force. Maybe David Graeber thought differently, but maybe he’s just another guy thrown up by the tumult of our times, like Jordan Petersen. Sex life of lobsters, anyone?  

I can't help thinkink you are continually missing the point. It's not just about collecting tax. It's about collecting tax in a currency only you can issue, a currency that on face value is worthless (paper & metal, or digital numbers).

> As I’ve said before, I think you’re confusing what you see in the media or the political realm with things that might represent any actual understanding. Eg, no one thinks it’s “tax and then spend”, because it obvious debt financing occurs, regardless of what they may say in public. Noted morons like JRM and JC aside, clearly; such men are fools whose only talent is meeting the needs of other fools. 

I disagree with the point of 'Tax & Spend'.  Watch news this weekend and I'd all but guarantee the phrase will come up. We disagree here quite profoundly - it's way to big a claim for you to say "no one thinks its “tax and then spend”.

I've never got Jordan Peterson, so there's hope of us agreeing on something. 

1
 seankenny 06 Mar 2021
In reply to Shani:

> I can't help thinkink you are continually missing the point. It's not just about collecting tax. It's about collecting tax in a currency only you can issue, a currency that on face value is worthless (paper & metal, or digital numbers).

Yes I understand that you want to keep repeating that phrase. But to me it sounds a lot of ahistorical nonsense. I think there’s a big difference - as I’ve said up the thread - between using gold or other metals, and paper. I’m also of the opinion that the story of money is exciting and weird, so people enjoy talking about it, but it’s of limited use  for working out that to do about debt, spending, etc.

> I disagree with the point of 'Tax & Spend'.  Watch news this weekend and I'd all but guarantee the phrase will come up. We disagree here quite profoundly - it's way to big a claim for you to say "no one thinks its “tax and then spend”.

I mean no one in power. Brenda in Hull may think this, if you asked her, but so what? 

Anyhow the phrase goes together as the two are linked. I’ve asked several times why poor countries with less activity to tax spend less, and have yet to receive an answer.

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 Shani 06 Mar 2021
In reply to seankenny:

> I’ve asked several times why poor countries with less activity to tax spend less, and have yet to receive an answer.

Can you elaborate on this question?

 seankenny 06 Mar 2021
In reply to Shani:

Explain the link between taxing and spending with reference to that fairly obvious fact.

 Shani 06 Mar 2021
In reply to seankenny:

> Explain the link between taxing and spending with reference to that fairly obvious fact.

You'd have to specify the poor countries you have in mind. It's too broad a question to attempt an answer.

 Shani 06 Mar 2021
In reply to seankenny:

> I mean no one in power. Brenda in Hull may think this, if you asked her, but so what? 

I don't think this is right. The media coverage of QE back in 2008 had many politicians & reporters struggling to cover the novelty that we could essentially loan money to ourselves, especially as it went against the narrative of "spending the money of hardworking taxpayers" (a phrase still used in politics).

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 seankenny 06 Mar 2021
In reply to Shani:

> You'd have to specify the poor countries you have in mind. It's too broad a question to attempt an answer.

I’m out. If you can’t be bothered to answer a question then it’s pointless. 
 

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 Shani 06 Mar 2021
In reply to seankenny:

> I’m out. If you can’t be bothered to answer a question then it’s pointless. 

A strange response because I can be bothered, hence my request for an example. It's too broad a question for what is a complex area (you made the same point above regarding Weimar).

I guess I'm out as well.

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 DancingOnRock 06 Mar 2021
In reply to Shani:

>Tax is how the government gets us to do its bidding.

 

That’s completely incorrect. 
 

At the time that taxes were introduced. Roads were private and you paid tolls, there were no hospitals, no schools, no fire brigades, no public services etc. 

Post edited at 12:16
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 seankenny 06 Mar 2021
In reply to Shani:

Why do counties who don’t have the activity to tax, or the ability to tax much of that activity (due to a huge informal sector) not spend as much? You’re claiming no link between taxing and spending, so how does that match with what we see out in the world? I’ve asked this several times and you wiggle out of an answer. 
 

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 Shani 06 Mar 2021
In reply to seankenny:

> Why do counties who don’t have the activity to tax, or the ability to tax much of that activity (due to a huge informal sector) not spend as much? You’re claiming no link between taxing and spending, so how does that match with what we see out in the world? I’ve asked this several times and you wiggle out of an answer. 

At the risk of getting lured back in, I'm not claiming "no link between taxing and spending". I'm saying we can spend withiut first having the tax. And we do all the time.

'So how does that match with what we see out in the world' you ask? QE gives a clue.

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 Shani 06 Mar 2021
In reply to DancingOnRock:

> >Tax is how the government gets us to do its bidding.

> That’s completely incorrect. 

What's the objective of Sunak's recently announced Freeports? Does a tax incentive underpin this? 

Seems to me that Freeports are a good example of the government getting us to do its bidding.

 DancingOnRock 06 Mar 2021
In reply to Shani:

What exactly is ‘the governments bidding?’.

You know it’s not the government’s money, they don’t benefit from it, it’s money that’s used to keep the economy running? We benefit from it. 

2
 DancingOnRock 06 Mar 2021
In reply to Shani:

Now you’ve lost everyone. Do taxes pay off loans and/or pay for services or are they complete imaginary and the money just evaporates somehow?

QE is a massive loan. And it is creating money, the same as any other money is created. It disappears when the loan is paid back.

Money is not a real thing. It’s a tool to enable goods and services to be exchanged easily. 
 

That’s why it doesn’t need to be underpinned by gold. There’s not enough gold for the whole world to operate. Gold is an element that we need to use in everyday applications. You can’t have it costing £million an ounce. That’s when you really do have problems. 

Post edited at 14:57
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 seankenny 06 Mar 2021
In reply to Shani:

So what is the relationship between taxing and spending then?

As for freeports, this is the government proving an incentive to act in a certain way. Economics is in large part the study of incentives, whether that’s from government, firms, when buying or selling, etc.

This is not the same as “getting us to do things it mandates” - as those are usually backed up by force. If you’ve got conscription in your state and don’t serve, you’ll get put in prison. 

2
 Shani 06 Mar 2021
In reply to seankenny:

> As for freeports, this is the government proving an incentive to act in a certain way.

Thanks Sean. This is the support i was looking for to counter DancingOnRock when s/he called my statement that tax was a mechanism the government uses to get us to do its bidding "completely incorrect".

We've definitely moved forward. 👍

3
 DancingOnRock 06 Mar 2021
In reply to Shani:

That’s hardly ‘doing it’s bidding’. 

3
 Shani 06 Mar 2021
In reply to DancingOnRock:

> That’s hardly ‘doing it’s bidding’. 

Save to say I'd imagine it is common sense amongst most people that the government's objective in creating a Freeport and its use of tax incentives as an instrument to deliver that, is absolutely an example of tax being used to make 'us' do the government's bidding.

I guess this is a prime indicator that the thread has run it's course because if we cannot agree on terminology then the debate is already compromised.

Post edited at 16:26
2
 DancingOnRock 06 Mar 2021
In reply to Shani:

Lol. I would say that it is to influence some people’s financial behaviour. 
 

How exactly is it making you behave? 

4
 Shani 06 Mar 2021
In reply to DancingOnRock:

> Lol. I would say that it is to influence some people’s financial behaviour. 

> How exactly is it making you behave? 

You've seen an example of a macro influence on behaviour through tax and now want to see something at the individual level? Let me oblige; fuel tax/diesel car tax, cigarette tax, sugar tax.

But look, I'm done.

2
 DancingOnRock 06 Mar 2021
In reply to Shani:

The government influence some behaviours. They don’t control you. 

4
 seankenny 06 Mar 2021
In reply to Shani:

> You've seen an example of a macro influence on behaviour through tax and now want to see something at the individual level? Let me oblige; fuel tax/diesel car tax, cigarette tax, sugar tax.

> But look, I'm done.

This is creating incentives. If the government decided to support U.K. climbing manufacturers by slapping a tariff on foreign gear, it would not be mandating me to stop buying Totems, which I prefer to Dragons, simply making that choice more costly to me. I have not been mandated to do anything.

Compare to the government deciding I can’t buy an automatic weapon: now there it is using a mandate, as you just can’t buy one legally. And if you do obtain one, the government can and will use force to take it from you. It’s banned them, not taxed them at an absurdly high rate.

This is absolutely standard stuff. 

It is not a case of “agreeing on terminology”. I am using what is literally the totally standard terminology used in the study of these phenomena. You may want to ask an astronomer if she looks at “twinklies” through her “big big tube”, but don’t be surprised if she gently corrects you. 

Post edited at 18:41
2
 Shani 06 Mar 2021
In reply to seankenny:

> It is not a case of “agreeing on terminology”. I am using what is literally the totally standard terminology used in the study of these phenomena. You may want to ask an astronomer if she looks at “twinklies” through her “big big tube”, but don’t be surprised if she gently corrects you.

What a curious response Sean. You appear to have taken umbrage at a comment that wasn't directed at you and ranted about god knows what. You misread a response earlier. I suspect you've done so again?

Post edited at 20:57
2
 seankenny 06 Mar 2021
In reply to Shani:

> What a curious response Sean. You appear to have taken umbrage at a comment that wasn't directed at you and ranted about god knows what. You misread a response earlier. I suspect you've done so again?

The thing is, what Dancing has posted seems okay to me. I’ve not taken umbrage with what you’ve written, nor am I ranting - I’m just explaining something where I reckon you’re using words sloppily, and it directly related to what we’re talking about. 

 

3
 Shani 06 Mar 2021
In reply to seankenny:

> The thing is, what Dancing has posted seems okay to me. 

No, you stated "I am using what is....".You thought it was about you.

1
 seankenny 06 Mar 2021
In reply to Shani:

What I think is going on here is that your man Graeber talks a lot about debt as bondage and a system of power relations. And why not? He’s an anthropologist after all, and it seems quite a reasonable take to me at least some of the time. But when you talk about the government taxing people so we “do its bidding” I think you’re taking the power relations idea to a place where it’s irrelevant, or doesn’t really explain what’s going on. Both I and Dancing reckon this is, hmmmm, not an accurate description.
 

You’re free to discuss the ideas I’ve talked about, or not, or suggest new ideas, or fully explain your own. Those options strike me as better than the playground nonsense you’ve been posting. 
 

3
 Shani 06 Mar 2021
In reply to seankenny:

> What I think is going on here is that your man Graeber talks a lot about debt as bondage and a system of power relations. And why not? He’s an anthropologist after all, and it seems quite a reasonable take to me at least some of the time. But when you talk about the government taxing people so we “do its bidding” I think you’re taking the power relations idea to a place where it’s irrelevant, or doesn’t really explain what’s going on. Both I and Dancing reckon this is, hmmmm, not an accurate description.

This turns on you and Dancing struggling to comprehend what i mean by "do its bidding" as a turn of phrase in the context of tax being used as a lever on behaviour? Yep, we're going to struggle here more than i feared.

> Those options strike me as better than the playground nonsense you’ve been posting. 

Strange accusation given your "twinklies" comment above!

1
 seankenny 06 Mar 2021
In reply to Shani:

> This turns on you and Dancing struggling to comprehend what i mean by "do its bidding" as a turn of phrase in the context of tax being used as a lever on behaviour? Yep, we're going to struggle here more than i feared.

That phrase has a quite different meaning to the one you now attribute to it. If the government wants to get people to “do its bidding” it usually does so by employing them. Or by running a command economy: the Soviets could order a city be built in Siberia and it was. That doesn’t happen in the same way here. The phrase “Saddam Hussein had henchmen to do his bidding” is not taken to mean there was a cheap deal on cattle prods at the Baghdad Torture is Us store. 
 

You’ve used words sloppily and a couple of posters have pulled you up on it, that’s all. Either that, or confused two different ideas about what governments do, ie incentives vs coercion. 

Post edited at 22:23
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 DancingOnRock 08 Mar 2021
In reply to seankenny:

Indeed. Bidding is a command or a request. 

The government does not tell me what to do, or ask me to do things.  
 

It concerns me that people really have no understanding how free we are in this country to do what we want and somehow think the government are controlling us via taxation (of all things!). 

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