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Jim has once again provided an excellent insight into a critical issue of our time. Many of the problems faced by society today specifically revolve around the failure of the general populace to understand how fiat money works (or should work). This is not an accident of history. Both of our major political parties are subservient to oligarchy and have no interest in sharing this information with the public. It works to their benefit that people do not know and they insure that the media they control does not let this information get out.

Keeping the people focused on deficits and debt means that neoliberal austerity policies can continue to be foisted off on the public. These policies are entirely counterproductive and serve only to further enrich the plutocracy while crushing the citizenry into ever increasing poverty and desperation. The information provided here is vital and every effort should be made to see that it is disseminated as widely as possible.

Thanks again for your support.

A most necessary and helpful discussion of how MMT is indeed the way forward for the left, along with a reclaiming (from the right) of the ideal of national sovereignty--making America great, not AGAIN, but in a way it never has been for ALL of its people (see "Reclaiming the State" by Mitchell and Fazi). As long as MMT is confined to academic discourse, it will fail to catch fire with the majority of the public. Instead, MMT should be linked to a Bellamy-like vision of what our country could be via properly-controlled fiat money. While Bellamy's utopia shines only on the distant horizon, how about an immediate call for what some have named The New New Deal, extending into FDR's second bill of rights and emphasizing the addressing of crucial environmental issues?

Thanks. Glad you liked it. I love the invocation of Bellamy. And, yes, FDR's bill of rights is a good touchstone. I think you share my point: It shows we can do so much of what we want.

J.P. Morgan's son convinced Woodrow Wilson to not touch the FED since it was needed to fund World War I. https://www.youtube.com/wat... Nomi Prins (Colonel House, advisor to Wilson, was controlled and part of the global banking elite as well)

Yes, this is all true. Others have brought up the petrodollar thang, the unique arrangement that allows the US to run a colossal debt without excess inflation.

The only quibble I have is that it is not clear that a public Bank would be an improvement. It has been tried twice in the USA, and both times was a swamp of corruption. Loans were made with political pull. Often there was no attempt to repay. I suspect that China operates this way. In China last year I saw a great quantity of empty buildings. Streets with miles and miles of brand new empty buildings. I imagine that Chung Bigshot Borrower socks away 10% or so in a tolerant country. What matter then if the enterprise goes bankrupt? He's got his pile regardless.

The USA COULD just print the money and have no debt. The idea is that debt imposes some degree of fiscal discipline. True? I don't know.

The only way to find out would be to give MMT a try, well aware that the concept will be perverted and abused as much as is possible. I am inclined to think that the Fed is the lesser evil compared with a Bank of the United States. But I think you would have to be God to know what the result would be.

Wow you censored my comments? I'm gonna tell Counterpunch you're a fascist fake! Here a Canadian Billionaire completely corroborates what I said about the U.S. dollar https://www.youtube.com/wat... It's a petrodollar based on u.s. military strength. Michael E. Hudson points this out as well. I did a third of my undergraduate degree in economics. Luckily I double posted my comments elsewhere! haha. Hilarious. I'm gonna expose you know as a fake!

BTW, to address the substance of your comments (at least in part), I'm well aware of the how petrodollar has worked (not sure of its future), and I agree with you that it's been an important underlying element of our foreign policy. I don't think any of that impinges on or refutes MMT (of which Michael Hudson is a proponent). it's another, parallel story

How many Noam Chomsky books have you read? I wrote a paper in 1998 for my graduate school course on, based on Chomsky's analysis, that the U.S. would invade Iraq again as genocide and that the sanctions were genocide because of three structural factors: To promote weapon sales. 2) to keep monopoly control of the oil sales to Germany and Japan, etc. 3) to prop up the Petrodollar.

We now have 900 military bases in other countries, the military has trillions in "lost" spending and has raided other budgets for secret black budget money, we just voted in a huge military increase of $70 billion.

How can you ignore that the U.S. is an oil empire ever since we took over oil control of the middle east from the British or at least shared it? The 1953 CIA coup of Iran was so Rockefellers could get Iranian oil money - which they did for a long time and still want it back.

So how is this a "parallel story"? It's the backbone of the U.S. economy, as Chomsky points out, Western science research is funded by military money and then given off to the "private sector" to hold up the fake news about a "free market democratic freedom." This is how money works - ever since China printed paper money - the first do to so, and enforced its value with the military, as Professor Jack Weatherford details in his book titled "The History of Money" - have you read it?

Sorry, I do not see how any of this directly addresses the basic principles of MMT as I laid hem out. As I said, they describe the workings of a fiat currency withing the domain of the monetary sovereign. The question of how things work in the international realm, and the role of the dollar as de facto reserve currency of the world (now under threat, as your Canadian speaker correctly notes), is very important and required other considerations that I did not go into. I noted this in my second endnote

You seem to think something I've said here ignores or contradicts other left analyses of American financial and military.imperialism, and you seem to be angry at me for that (or for some other reason). You were very quick to brand me a "fascist fake." (Does that still stand?) if you take a look at the many articles on this site where I've talked about Syria, Palestine, etc. you'd see that I'm not trying to hide from or deflect radical critiques.

(To answer your question: No I haven't read that book.)

The purchase system has its beginnings when Henry II (1133–1189) relieved the landed class of a medieval tradition introduced by William the Conqueror which required landowners to supply theKing with knights for 40 days of the year. Instead, Henry II began a form of taxation with which he hired mercenary companies. The modern commercial connotation of the word “company”, in part,reflects the commercial nature of these armies. In addition to pay, the companies received a fraction of the plunder of war, including any ransom from captured prisoners and contributions for protected property. Shares in these companies were determined by the capital investment of its members andwere tradable. The purchase of shares by active soldiers was the institutional forerunner of the formal purchase of commissions, which fully developed in the 17th century. Initially these corporations were composed mostly of foreigners.http://www.academia.edu/5244158/EC...

When it came time for Canada to settle its western frontier the new country faced a similar problem, only this time the threat was not Mexicans or Indians, rather it was Americans moving north. Selling the land to private interests would not improve the Canadian claim to sovereignty on the prairies if there were no guns to back it up. Thus the Canadian government adopted the identical homesteading laws the U.S. had used to settle their frontier. By providing an incentive to settlers to “rush” to the prairies and stay to improve the land, the area was populated by Canadians who quite naturally kept the Americans out.

O.K. you say focus on the domestic economy? You realize the U.S. was founded as a slave colony? Have you read the work of Gerald Horne or seen his CSPAN talks? He points out that the U.S. is much like Rhodesia was against Zimbabwe - the British was outlawing slavery and the U.S. needed to maintain slavery and did not like the British taxing slavery. That was the real motive for the U.S. "revolution." The Constitution has a "Commerce Clause" which means the U.S. federal government overrides any state or local laws to ban or revoke corporations if any of their business cross states lines. So for example there was a "Family Farm Law" in South Dakota. A buddy of my dad's was a Federal District Judge and so we had dinner with him the night before he heard the arguments. His mind was already made up because he subscribes to the corporate economics of the fake "free market" ideology - from the American Enterprise Institute and the Federalist Society, etc. Which is to say if Cargill, the largest private corporation in the world, wants to own farms directly, then no law can stop it from doing so, even if it doesn't "live on the land" as the family farm law required. And similarly Cargill dominates food supplies on 100 countries through the U.S. "Food for Peace" plan - which means to "dump" food in other countries - like in Somalia at 1/6th the local farmer price - thereby undermining local sovereignty. And so as the Rockefellers - who helped Cargill survive the Depression - and Kissinger - they state - what is more important "food or oil"? If you control a countries food supply than you control their domestic oil as well. And so the reason 1 million Mexican farmers fled into the U.S. as economic refugees is because Cargill dumped corn into Mexico, after NAFTA. So the WTO was created out of Bretton Woods and the IMF and World Bank have set up a system whereby foreign countries need to pay back their loans in "hard currency" meaning U.S. dollars - and therefore have to export monoculture that is destroying their ecology - or export other "primitive accumulation" extraction - raping Mother Nature. Which is to say a country can not just pay back their international loans by printing money can they? Obviously not.

"most international loans to governments require repayment in dollars or some other hard currency"

So you say the dollar is a "domestic" currency? I don't think so. The U.S. Central Bank has always been dominated by foreign banking interests.
Wiki:
As ratification in early 1781 of the Articles of Confederation had extended to Congress the sovereign power to generate bills of credit,
it passed later that year an ordinance to incorporate a privately
subscribed national bank following in the footsteps of the Bank of
England. However, it was thwarted in fulfilling its intended role as a
nationwide central bank due to objections of "alarming foreign influence
and fictitious credit," favoritism to foreigners and unfair policies
against less corrupt state banks issuing their own notes, such that Pennsylvania's legislature repealed its charter to operate within the Commonwealth in 1785.

First Bank of US: it was partly owned by foreigners, who shared in its profits. Also,
it was not solely responsible for the country's supply of bank notes. It was responsible for only 20% of the currency supply; state banks accounted for the rest.

federally issued Treasury Notes to create credit as the government struggled to finance the War of 1812

So from the get-go the Central Bank has been driven by War financing. Can you give me any reason why it would be any different? The first wars were to expand the U.S. empire - against sovereign native indigenous nations.

The U.S. domestic economy has always been controlled by the elite - John Jay and James Madison and Alexander Hamilton all emphasized that the wealthy needed to rule as a minority against the masses.

Even after the revolutionary war - soldiers were not paid and then when taxes were levied on alcohol - a riot occurred.

The National Banking Act of 1863, besides providing loans in the Civil War effort of the Union,

So that's the THIRD federal bank - again driven by war profits for the elite.

After that corporations were declared legal persons and so the "free market" was officially fascist - or as Bertram Gross calls it "friendly fascism."

The Gold STandard was dropped, as I point out and the Canadian Banker points out - because of War debt spending. So you keep saying "fiat currency" - but what does Fiat literally mean? "Let it be done." O.K. talk is cheap. Money is backed up in value by military force - it always has been - since the Chinese and now the U.S. spends more on our military than the rest of the world combined - when you consider all the weapons we export and all the secret money that disappears from the rest of the government.

So there is no "fiat" currency - a government gets is money by enforcement tax payments (legal thuggery) or by getting loans from rich people who used to have private armies to enforce their interest payments - going back to the Knights Templar.

For example in the Amazon - Cargill built an illegal soy bean storage elevator - and Brazil tried to ban it - a judge ruled against it. Cargill could care less and is backed by the U.S. and the World Bank. So then Cargill said - grow as much soybeans as you can and will will give you money for them. Guess what? Soon soybeans became an official currency in the Amazon! Soybeans were as good as gold in the Amazon. Soybeans were literally money.

So that's "fiat currency" - it's not just printing something willy-nilly - it has to be backed by military force.

So I found your previous two comments marked as "spam" and
held from posting in my Disqus account.. i did not know Disqus (the comment system I use) was doing this. in fact, weren't the comments (at least one of them) previously posted? Disqus seems to have decide after the fact to remove them!

I found a bunch of comments on different posts, going back seven months, that had been held back as spam because of some Disqus algorithm, I guess. I think their algorithm may have changed regarding that. I thought i had set Disqus to post without moderation. My policy has been to keep comment to be freewheeling, since I can always delete obviously irrelevant spam or personal attacks myself. Anyway, thanks for reading and posting, and I'm glad you made me look into this..

I did not censor or remove any oomment on this post. I don't think I've ever removed any comment from any post.

I remember your name and am surprised myself that there doesn't seem to be a comment from you below. I'll have to look into my Disqus account. (Disqus is the comment system I use.)

A very good powerpoint explanation by J.D. Alt:
https://www.dropbox.com/s/g...

Kavanagh has two behemoth falsies stuffed in his bra.

ONE

In general, poor and ill-defined terminology, viz: Radical. Example:
"
For me. [sic] MMT has demonstrated persuasively that the entire conventional taxes-for-revenue problematic [sic], as an economic paradigm, is a crock, a fiction, a set of mystifications, which needs to be swept away—and replaced with a paradigm that opens more radical possibilities, and has the advantage of being true.
"

By all means! Do let's sweep away the crocks! Sweep! Sweep, I say! Only then can we see for ourselves those radical truths, which simply must be there... no, not there -- THERE! Yes, there, to the left of the fictions, just behind that set of mystifications. No? Damn. I was sure they would be there.

Anyway, gotta laff some time.

The meaning of "radical" of course depends on context. A "radical" treatment addresses the root (radix) of the problematic [sic]: mastectomy, tooth extraction, beheading, termination of service, nuclear exchange.

Okay, okay. Let's say Kav also means politically (theatrically) radical. He fails to present just how one can know that a solution -- as yet unformulated -- will be, or should be radical? (Pause for effect.)

It's hot air and naught else, i.e. it is rhetorical.

"Radical" here is used as a sop, for an audience that likes to think of itself as radical. Given the audience make-up, he may as well say we need an affordable, compassionate, gluten-free, caring and nurturing solution, which is also organic, free-trade, lgbt-friendly, woman-owned and of color, because it must be there. (Sniff-a-tear.)

Kavanagh's intentions are likely admirable -- if he actually intends to find a solution by way of a truth -- but I call the sad industry which manufactures this sort of flabby talk -- the flailing, the signaling, the hand-wringing -- the Rhetorical Left. Intentions simply never count.

By design, The Rhetorical Left anesthetizes audience members who require little more from their politics than to see themselves in such-and-such a light. "I'm a radical!" We see it now in every public, self-pleasuring, Left-ish expression: A Day of Rage; #Resist; Speaking Truth to Power, and so on.

(I digress: Along the same lines, Saint Obama bandies words -- as do all front-men and con-artists -- like "innovative" and "visionary." "We need more innovative solutions." Same story. It's a rhetorical device, consensus-by-anesthetization, a label glued hurriedly on some cans, the sole purpose of which is to flatter and bolster this or that consumerist self-image held among The Atomized, The Measured, The Predictables, and yes, even The Deplorables. [What's in the cans is anyone's guess, but I'd bet it's nearly always some corporate / special interest mystery meat.]

The idea that a possible solution, in the abstract, must and will be innovative [or radical] betrays some glaringly wrong and purposely deceitful assumptions, first and foremost that we have exhausted all prior [or non-radical] options. In this regard, and to the peril of us all, The Cult of Innovation [Rhetorical Left] is willfully blind to history. As rhetoric, it is simply a false proposition, implying a blind faith in technocracy [or radicalism]. Little value or effort is placed or made upon a real understanding of the problem.)

TWO

Specific, factual misunderstandings, for example:

"
A whole set of hand-wringing questions about taxes, spending, debt, and deficits disappears, simply vanishes, in the light of the singular, indisputable fact—MMT’s first premise—that the federal government, and only the federal government, creates money.
"

While such "radical" statements (as well as the clean, courteous diagrams) are sort of helpful, and may well be new information for his otherwise moss-covered readership, his "singular, indisputable fact" itself contains one or two "teensy huge" errors of fact.

1. The US federal government does not create money (except for coins). They borrow it from the Federal Reserve (except for coins). The Fed issues paper currency, and sets interest rates and monetary policy.

2. The federal government is not the sole creator of money. Any -- absolutely any -- lender (bank) can and does create money out of thin air, through fractional lending.

CONCLUSION

Factual errors and blindspots aside, Kav seems at great pains to clothe his admirable directive -- that the specious "Household" paradigm, re taxation and finance, should be expunged from leftist thinking -- in terms and assumptions which, at the cost of coherency, must not resemble or align in any way with, say, the rhetoric of Ron Paul, or with that of anyone on the right who has spent so much breath on exposing and countering the very same false paradigms.

And he doesn't stop there, but gives the whole messianic, Rhetorical Left canard away: MMT will "pull back the curtain on what’s conjuring up the show that’s been mesmerizing us." And he ends with a priestly blessing: "[t]he road to a socialist dawn will dead-end unless more people understand [….]"

While it's impossible to address or argue such moronic pronouncements, Kavanagh's wishful and "radical" messaging reflects his own frustration, addressing as he does the self-involved needs of an aimless, moribund non-movement.

Check out this Facebook page for some critical comment: https://www.facebook.com/gr...

You have correctly summed up the "meme" of MMT and this meme is complete
b.s. Why do people eat it? Because money is the ultimate technology and
people desperately want technology to save us. So if you read the
comments on that link - people keep pointing out that the MMT meme
conflates the Fed with the government. This is why I referenced the
North Dakota Bank - which is a government bank that invests with no
interest - loans. But did that turn North Dakota into some
sustainability paradise? haha. To sum up the problem of MMT in one term:
"Debt deflation" as economics professor Michael E. Hudson calls it.
monetary policy has to be tied to the purchase of treasury notes which
are government IOUs - bonds. So basically the U.S. has a secret deal
with OPEC - or most of OPEC - to invest their profits back into the US
Wall St and banks - while requiring sales of oil in U.S. dollars. In
other words - if Saudi Arabia requires u.S. dollars for its oil - what's
it gonna do with a foreign currency? Invest it in the U.S. - which
means Saudi Arabia controls the U.S. - it's called the U.S. Petrodollar.
It was set up by Kissinger - because the Vietnam War was too expensive
for the FED and so the U.S. desperately needed a new form of value for
the dollar. so the dollar was decoupled from the gold standard and
Kissinger propped up the dollar based on the value of oil. Which is of
course maintained by U.S. genocide wars - called the Carter Doctrine by
the Trilateral Commission. So then as Chomsky points out - Germany and
Japan are controlled by the U.S. having monopoly control of their oil
supplies via U.S. dollars. But in terms of trade deficits - the reason
we have them so high is because we also require that China, Japan and
Germany then buy U.S. treasury bonds. So about a third of U.S. debt is
owned by other countries - and then a third is for social security. But
the real reason social security is going bankrupt is because Reagan
began raiding social security in order to double the military spending -
thereby vastly increasing the debt. And not just social security got
raided - Catherine Austin Fitts exposed how HUD got raided and other
federal agencies get their budgets raided to prop up a bloated military
budget that is not even audited. Keep in mind that the U.S. also relies
on CIA drug dealing to bring in about $1 trillion a year in hard cash -
to prop up the economy. So the political parties are completely
controlled by the hard cash of CIA drug money. Then the CIA creates
money laundering banks - Carter's Trilateral administration was part of
BCCI - which was a CIA bank set up in the middle east - with global
drug-military laundering. Then the CIA setup another bank in Australia
to launder all the drug money out of the Golden Triangle. Also the
collapse of the banks in the 1980s - the Thrift banks - that was a CIA
raiding of those S & L banks. And so the Fed Bailout of trillions of
dollars after 2008 - to prop up other banks around the globe - was
literally the biggest theft of money in world history - the whole thing
was staged, as the film" The Big Short" revealed - but also a great doc
expose on it - is Charles - what's his name? Inside Job.

Yeah that doc is called "Inside Job" - it's on youtube if you dig for it. It interviews all the economic professors and exposes how they are completely controlled by the big banks to lie about the economy. O.K. and there is a great animation expose on the FED - on youtube.

Kissinger sits on China's national petroleum board of directors.

This is also the real reason the U.S. is invading Iran - because like Saudi Arabia, the Rockefellers use to control Iran's oil money via a CIA coup in 1953. Similarly with Venezuela - U.S. wants the oil. Libya was setting up an independent currency as was Iraq. China is trying to set up buying oil without dollars, etc.

Hi Jim, I originally read this on Counterpunch. Glad to see they are embracing some MMT. One thing I think it's important to point out is that MMT considers The Fed to be a government institution. Full stop. See Bill Mitchell's blog on "Who is in Charge?" Embracing the idea that the Fed is somehow a private institution is neoliberal framing and only serves to confuse the issue. Not a fan of Ellen Brown for this reason. Plant it in the Government camp and all questions of currency issue go away. Compare the Ruml article with Brown's perspective and you will see the difference.

Also, not sure where you are getting that banks earn 10% interest on reserves they hold. The Fed does pay IOR, but that is functionally a monetary operation in order to control the overnight rate. I don't believe it is anywhere near 10%. Finally, it's worth noting that all Fed income less operations and the 6% dividend are returned to the Treasury, reinforcing the idea of the Fed as a part of Gov't.

Regards,

David Gerlitz

Thanks for you comment, David. Thaks especially for noticing the 10% error. That was definitely a misstatement, and I changed it. It now reads: "interest on the 10% reserve they hold." That's from Ellen Brown, in Web of Debt - The Fed Now Owns The World's Largest Insurance Company -- But Who Owns The Fed?.

I do tend to agree with her emphasis on the "private" nature of the Fed, though I also said it was a hybrid intstitution. We'll call that agreeing to disagee. I also do know the Fed's income, net operantion costs and that dividend, is returned to the Treasury. I was emphasizing that dividend, which is not a bad piece of change.

As I said, I expected I might make some mistakes, and I know there will be some disagreement, even within MMT. I'm not a professional economist, My purpose was to lay out the important general principles and their progressive political implications,
for ecnomically-aware but non-specialist socialists and marxists like myself, so that they'll understand the need to take MMT seriously. I hope I've given the impetus for progressives to go to the expert literature, and engage with the debates. If I've done that, I'll be pleased.

I think you did very well. I'm a layman myself and the whole "What the hell IS the Fed?" question was one I landed on myself for awhile. I would encourage you to linger on it a little. I'm actually not a Marxist or even consider myself a Socialist, but if you do then I would suspect you'll eventually come around to see it as wholly part of the State.

The academic core of MMT puts emphasis on "consolidation" of the Fed and Treasury into one Government Sector because it is a convenient way of splitting the economy into sectors and also representative of the way the monetary system operates. The most common representation is Government Sector; Private Sector; Foreign Sector. Breaking it down this way enables us to break the habit of seeing Government deficits as a liability and start seeing them as private sector assets; unfairly distributed or not.

I personally put more emphasis on the political aspect of consolidation. Once you see the Fed as part of the Government, that's right where the whole Household analogy completely falls apart and why it's a taboo subject.

Big tent, if you're attacking the Household analogy, imo, you're MMT. That's where the Progressive movement is going to shift the paradigm.

So for MMT to "work" as you envision it then we need a North Dakota Bank only for the U.S. right? Like what Lincoln did to fund the civil war? My understanding is the Fed can not raise interest rates much since then it could not afford to pay the interest on the t-notes that foreign countries buy/invest into the Fed. In other words because the Fed debt is so high - with how many trillions printed after the 2008 collapse? - now it is the end of the U.S. empire ...and other countries instead are working to free themselves from U.S. dollars as the global Petrodollar currency. And so going back to Lincoln - since the military contractors are in each congressional district - to spread out their lobbying influence for all politicians - I don't see how our debt spending would not go to the military as it has since Lincoln. Bernie says he wants to hold military spending to 50% of the budget - but this includes the debt payments. So yeah I don't see how "MMT" can have any ground since it would have to get around the Fed - and of course the Fed is situated in a global international finance elite, as the LIBOR scandal exposed. Anthony Sutton exposed this as well - the military industrial complex of the U.S. is not nationalistic but controlled by a global elite banking system that financed both sides of wars. So the Soviets were funded by Wall St., just as the Nazis were funded by Wall St. and the Brit bankers, of course, wanted to get the U.S. into the war, etc.

They know how it works.
https://www.youtube.com/wat...

Thanks for providing a clear discussion of MMT without all the economic jargon I often read elsewhere - this is perfect for the layperson. I will definitely pass this on to my confused friends and family.

Thanks, James. I'm glad you found it clear and helpful. This is the best kind of response I coudl hope for. It's good to get confirmation that I've actually been able to explain a postiion that the common wisdom makes so hard to "get." Perhaps the fact that I'm a "layperson" (not professional economist) myself helps. I;ve been talking about this with people in an ad hoc way for a few years, and writing something like this, I'm expaining it to myself in a systematic way that I hope can work for others as well.

Great explanation. You describe MMT very well. Congrats!

Thanks. Glad you found it helpful.