Random Guy

YES, homelessness in democratically controlled regions, such as California and Washington State, and large cities like SF, Portland, and Seattle have serious problems with inequality, employment, and asset prices. This is what [economic] liberalism produces. We are seeing the conclusion of 40 years of liberal [economic] policy pursued by both parties.

Note I didn't say the system wasn't flawed. We can trace a drop of fuel through an engine without saying whether or not the engine is flawed. All systems are flawed, that's called entropy 😄. Whether or not its good or bad is another thing entirely. Whether or not the Fed and private banks can create money is different than money's effect on prices. Clearly, we can identify that banks create lots of money, and some of it is inflationary, and, some of the inflation falls into categories that people ignore (ex: asset price inflation, no one complains that house & stock prices are rising to the degree that gas prices are). Here is a chart showing the balance of Fed purchases (increase in gov money) relative to the US CPI: Money cannot be a 'proxy' for human output, because lots of human output, especially in services, is non-monetary in nature (ex: a mother's work producing children). Or, imagine a slave economy, where all output is produced by slaves and consumed by slave-holders, and that output has no price. The quantity of money and the quantity of output would be irrelevant to one another. Can we agree that banks are the source of money? Private and public banks are money creators, and this occurs when banks issue loans? I want to know where else money comes from, if this is not the only source.

The purpose here is to learn about financial systems, reconnect folks' instruments panels, so to speak. First, private banks do lend unsecured. But I don't follow your argument that private money creation is never inflationary, but gov money creation is always inflationary. In the case of Fed QE, inflation for consumer goods was low from 2008-2020, yet Fed money creation was quite large. QE supports asset price inflation. The gov spending from 2020-2022, on the other hand, was directed towards goods and services, and we see an associated increase in consumer goods inflation. Wages are muted, profit margins have increased. In effect this was gov transfer to businesses in the form of profits. But this is getting quite into specifics when you haven't quite nailed down clearly for me what money is and is not. I'm not here to argue the merits of MMT, whatever you think that is. I'm here to discuss operations and dynamics of financial systems and money. MMT is largely about policy, and I leave policy up to each of you. We can reconnect your instrument panel, what you do with the jet is your choice. It seems as though you have swapped one word, money, which you don't have a concrete understanding of, for another word, productivity, in an effort to escape the investigative spotlight. So, I'll ask you define your new term, what is 'productivity'? And, let's get specific, imagine a town without money (common in the anthropological record, ~4000BC time frame, middle east). A group of folks living together who go about their day as a team, assigning tasks according to a hierarchy, and living without any monetary constructs to allocate labour or other resources. They eat mostly barley, have simple tools. Is productivity present in this setting? In the context of productivity being any increase in outputs for any given combination of inputs, the exchange of 'money' is irrelevant to the technology used by the folks in town, isn't it? If a member of this team organizes the digging of irrigation ditches to increase crop output, does money somehow magically appear, agreed to by everyone of the team, to facilitate an exchange of labour for an increased crop at harvest time? Why? Or, imagine your younger self (instead of the Sumer example). Brand new 2LT, copying and pasting data from one document to another. Your wage is fixed. You discover "Ctrl + C, Ctrl + V", increasing your data transfer productivity 2x. Does this create money? Does it require money in order for you to learn something new? Are children not learning because they aren't paid or because insufficient money exists in circulation elsewhere? What would be an example of misdirected or negative productivity changing a quantity of money or the capacity to create money of a money creator like a bank?

Which ideas, can you list a few? When you say 'The economy will tank in 5 years', can you be specific about what that means? Ex: unemployment is 8-9%, stagnant or decreasing [real] wages, increasing reliance on imports, reduced mortality and birth rates, ?

Ok, just to be clear, the listed policies that you disagree with do not have any personal impact on you. Do you want to prevent someone who lives at a distance from you from creating policies relevant to their community, in other words, impose your will upon them?

Which part is pedantic, can you elaborate?

Before someone posts "Yeah, but the gov is giving people money", or "When the gov spends its inflationary". Private banks do the exact same thing. Credit cards are loans for consumption, banks create the deposits from nothing. Home mortgages (makes up ~50% of total money in the US economy) are unproductive, houses don't produce goods and services for the public. Margin debt, for stock trading, that's fresh deposits created by banks from nothing for speculating on stocks. The big difference we see if that private banks have created huge amounts money, printed money, and directed it towards housing and stock purchases. Which caused asset price inflation. But people don't consider this 'inflation', when it is.

All money is 'printed'. Whether its the Bureau for Engraving and Printing (which creates cash, a Fed liability), the Mint (coins, a Fed liability), the Fed's ledger (digital reserve deposits, a Fed liability), or the Treasury (US Treasuries aka money market collateral, a Treasury liability). We think that this stuff is money, but 97% of money is private. Created by private banks. And there is no other money. So what's different between the Fed (a bank) creating a loan to buy a financial asset, and Wells Fargo creating a loan via a credit card for you to buy a financial asset? We can replace what we're buying, rather than a financial asset, we could buy an airplane (F-35 vs a Boeing commercial aircraft), pay employees (gov payroll, firm payroll financed via commercial paper), etc. The action is identical, the purchase equivalent--but your belief is that one is printing money, but the other is not. When in fact they are the same. All money is 'printed' by banks.

Just saw your edit ViperMan, and I'm replying in this thread given the subject. So I can clear up this confusion, if you'll bear with me. Even if it sounds crazy, gyro tumbling crazy. When you object to money being printed, is it clear in your mind what exactly money is in that scenario? In other words, when money isn't printed, where does it come from, where is it kept, what is it? In the second quote (Lord Ratners'), we must ask ourselves: when money does exist for the gov to spend, where and what is it? Because we can imagine the Treasury General Account (TGA) at the Federal Reserve as having a positive balance (this is the checking account of the Treasury, just like our checking account at a bank). If that account is empty, so to speak, 'money doesn't exist' for the gov to spend. But the Fed can always mark up the TGA, like it did during Covid or right now. So if the account can be set to whatever value we choose, what does it mean for 'money to exist' or 'not exist'?

Thanks for sharing. If you have more to add, please do. I see 3 distinct groupings of information you shared, the first is clear policies you are against, the second is not exactly policy (maybe you can clarify here?), and the third is an expression of anger. My question to you would be, how do the policies you listed (#1) negatively affect you personally? And, what policies do you support instead of each of the points you listed in section #1?

The deferred asset the Fed is creating as we type demonstrates that money is not an exogenous commodity, like gold. The Fed can write a liability to its ledger and is only constrained by the political rules we define for it. The Fed doesn't have to purchase private assets, like bank loans, in order to create reserve deposits. This money is not preexisting, and someone makes the determination of who will receive that money, in this case banks. And money is what allocates all resources--which means that there is a strict hierarchy created at the moment money is created.

I can break it into two parts to help you read it. Neoclassical econ asserts that money is exogenous, like a lump of gold that produces X coins (we won't get into medieval coinage), or the gov creating Y bank notes (we won't get into the creation of the BoE). Given some constant exogenous lump of money, the set of available projects at a given time determines where that money will flow as investment. The individuals who hold it (savers) always want to maximize their return (individuals are utility maximizers with insatiable wants, and have all available info on all projects at any moment all the time). There is a natural rate of interest, like a natural law, according to the available technology (which defines labour productivity). So, in this fantasy world money flows towards projects according to these natural features, the money can't go anywhere else. Its powerless. Exogenous money is critical to this vision. People save money (collect it) then invest it, investment determines capital, which determines total amount produced. In this interpretation, there is one good (like corn), which is consumed, invested, and used as money. The problem is if money isn't exogenous, what changes?

I don't want to troll anyone. I'm sure you're a good dude in real life, as we all are. We're just talking economics and politics, we may be opinionated at times, and disagree, and there's nothing wrong with that.

No worries dude, I can go it alone. @Lord Ratner?

@ViperMan Not being cagey at all. It's a fair question to you, 'What part is MMT?' Specifically--I want to know your level of knowledge, what makes something 'MMT', how do you know? In this thread I've posted an MMT source, a response by Bill Mitchel, which is just a current event for folks interested in current economic news. The rest is entirely Post-Keynesian and official gov sources, such as the Fed and the Bank of England (central banks themselves). I've specifically avoided MMT sources because of the political antagonism between US Republicans and MMT'ers in the US progressive party, given most folks here aren't US progressives and were taught Neoclassical Econ. I don't need MMT sources to describe the financial system, and I'm not advocating policy (excluding our earlier discussion of "Favorite Big Booty Latinas"). If you agree tracing a drop of fuel through a jet is a valid exercise to understand reality, you cannot be against tracing a unit of currency through the financial system to understand reality--assuming you accept that money is at the core of our economic system <-- I presume you accept that premise. Edit: But yes, its fitting that a billionaire wants you to believe that money doesn't make him powerful. Money has 'no power in and of itself'. Musk is powerless. 😄

Which part is 'MMT'? Edit: @ViperMan consider for a moment an analogy: tracing a drop of fuel through an aircraft. There is no ideological wizardry in understanding how the machine works, so long as our description of that machine matches reality, would you agree or disagree with that statement?

Lord Ratner's position treats money and government as separate from one another, he conceives of money strictly in commodity-money terms. Meanwhile, Nsplayr is arguing from an endogenous-money framework, where banks create money. This is the source of their disagreement. If we find ourselves analyzing the economy where we treat money like a commodity, its very similar to flying a jet with instruments that aren't connected, so the instrument readings don't relate to outside conditions. This is because the financial system behaves differently when money is a commodity (like gold) compared to bank ledger entries (pure credit). @Lord Ratner@nsplayr I'm asserting several premises below, I would be grateful for your participation, if you would either agree or disagree. I'm asserting: 1) Banks create new bank deposits when they issue a loan. 2) Banks create loans without first taking on deposits (pre-existing deposits are not 'collected and loaned out'). 3) Bank deposits exist solely on the respective bank's ledger. 4) Central Bank reserve deposits exist solely on the Central Bank ledger. 5) Central Bank reserve deposits are used by banks for settling transactions between banks. 6) Bank deposits cannot be moved from one bank ledger to another bank ledger, or transferred between banks. If you disagree, can you elaborate how your opinion differs?

No need to be so sensitive, or try to draw people into political circles that may not be relevant. If I ask it isn't obvious to me. What are the policies you don't like (that AOC supports) and which policies do you want instead? (1) and, Do you consider US democrats 'protesting' at times to be equivalent to 'Alex' shouting "U mah fav big booty latina!". It's tit-for-tat? (2)

I live in Europe. It's nice.

What is the political statement he's making?

Quite right. Its easy to lose our heads and devolve into confrontation. And we can easily right ourselves, and return to civility. We can and should right each other when we have lost our way, we all benefit from clear discourse.

What would be a good example of 'stating my ideological priors and foundational beliefs', so that I can best get you what you're looking for?

Correct, what is the point you made?

What do you think will happen?

Can you elaborate?