Reader “Smerls” says some aspects of MMT are simply unbelievable, because MMT people have never proven them.
(However “Smerls” believes politicians who claim, for example, that Social Security is “insolvent,” even though politicians have never proven this claim. Politicians can’t provide any proof, since it is a lie. Politicians spout this lie in order to make you grovel before them, and to legitimize the ever-widening Gap between the rich and the rest.)
I appreciate “Smerls’” frustration. Most MMT writers are unreadable. Worse, some of their claims are flat wrong. For example, most MMT people claim that federal taxes “drive money,” meaning that federal taxes are what sustain the legitimacy of, and demand for, a sovereign currency. This is obviously false, since many countries have no federal taxes or capital gains taxes, yet there is a demand for their sovereign currencies. And this is only one example of an MMT falsehood.
“Smerls” wants to believe in MMT, but can’t, since “he” (I will use the pronoun “he” for convenience) never gets his questions answered satisfactorily. And the MMT people don’t care.
I myself do not read MMT blogs. There are too full of errors, and their writers have sealed themselves into an academic bubble that no one cares about (including me).
Therefore we have this blog, plus Rodger Mitchell’s blog.
For one thing, “Smerls” wants proof that federal tax revenues are destroyed upon receipt.
In understanding this, we must first understand that money is not physical. Instead, money is a way to keep score, exactly like the points on an electronic scoreboard. A dollar, like a point, is a strictly mental unit of account that has no physical existence, and only has value because everyone agrees that it does.
Coins and bills can be traded and used like money, but they are not money, strictly speaking. They represent money. Likewise the title to a car, or the deed to a piece of real estate, represent the car or the real estate, and can be traded – but they are not the car or the real estate. They bear a written (and socially acknowledged) claim to ownership of the car or real estate. A dollar bill in your hand represents a written (and socially acknowledged) claim to one dollar’s worth of “full faith and credit” in the money system.
When you write a bank check, the check is not money. It represents money. The check can be used to buy things or pay for things, but this occurs because the check bears instructions for the accounting of money, which exists only in the digital ledgers of banks. The check instructs your bank to debit your account by the amount of the check, and to credit someone else’s account by the same amount. It’s all digital.
These are not mere semantic technicalities. They are the essence of money. Money only exists in the digital accounts of banks and bank-like entities. Check this out…
When you write a tax check to the U.S. government, the check instructs your bank to debit your account by the amount of the check, and to credit the U.S. Treasury’s account by the same amount. But since money is not physical, and can be created ad infinitum by the U.S. government (like points on a scoreboard) the U.S. Treasury has no need or use for your money. Your bank account is debited, and the IRS (which is part of the Treasury) acknowledges it. Where did your money go? It went to the same place that scoreboard points go to when we debit a scoreboard: nowhere. It was destroyed. Nothing physical moved. The U.S. Treasury’s word for this is that the tax revenues were “cleared.”
Some people cling to their delusion that money is physical by talking about “digital electrons.” This is silly. (Moreover electrons — unlike protons and neutrons — have no physical existence. We speak of electrons and light-photons as “particles” for mere convenience.)
Other people cling to their delusion by claiming that when you write a federal tax check, your money “goes” to a U.S. Treasury Tax and Loan account. However TT&L accounts are mere digital receipts (or records) of tax payments that are maintained by certain banks. TT&L accounts are also used to track and account for the “dispersal” of some forms of Treasury “funds.”
The words “dispersal” and “funds” are in scare-quotes because – again — money is not physical. Nothing moves physically. We just change the numbers.
TT&L accounts are mainly used to manage bank reserves when banks want to settle payments with the U.S. government. These reserves are a special form of currency, but they are technically not money, since reserves cannot be spent in society as money. Instead, bank reserves are a secondary points system.
Reader “Smerls” says that, “MS theory is basically national accounting masquerading as economics.”
Physicists use the word “economy” when they speak of energy. Economists study the flow of human and non-human energy and resources. Money is simply an accounting system for this flow. A dollar is a unit of account. Monetary Sovereignty explains how the accounting system really works.
Reader “Smerls” says, “I have had many discussions regarding these statements with a number of MS/MMT folks in the past and no one has provided proof or at least a reasonable explanation why these statement would be true. The best they could come up with is that it is simply accounting semantics.”
All economics, indeed all discussions of money, are essentially “accounting semantics.” When a politician or media pundit falsely claims that “Social Security is insolvent,” the word “insolvent” is an accounting term. So are terms like “funding,” “bankrupt,” “interest,” “expenses,” “deficit,” “balanced budget,” money,” “receipts,” “revenue,” and so on. These are all accounting terms, regardless of who speaks them. Accounting is a crucial and indispensable fact of all human endeavors. However there are correct forms of accounting, and there are other forms used by liars for their own gain at your expense.
Reader “Smerls” says that, “I do respect MS and do find it useful, but with a number of flaws on a number of levels. Statements like these are to me why most people ‘don’t get’ MS.”
If there are any “flaws,” they are weaknesses of explanation. As a theory, Monetary Sovereignty deals in facts, and is therefore as sound as is the theory of thermodynamics, or hydrodynamics.
Why don’t people “get” Monetary Sovereignty? Because of hate and habit. People who are not rich are financially insecure. (Many are in abject suffering.) Most people try to reduce their mental insecurity by hating everyone who is below them on the scale of wealth, income, and power. (“At least I’m not as worthless as that bastard.”)
I call this phenomenon “Gap dynamics,” and it is simply a rehashing of Rodger Mitchell’s teachings.
Hatred-of-those-below becomes a deeply ingrained habit that rules most people their whole lives. If you are not rich, then your hatred (caused by your insecurity) makes you believe lies such as “The U.S. government is broke.” You believe this lie so you can point to those below you and call them parasites. However this same lie lets people above you to call you a parasite, and to keep you starving. Wherever you are on the social ladder, you tend to think of yourself and everyone above you as “makers,” while you think of everyone below you as “takers.” This delusion is a product and a creator of hate, selfishness, and insecurity. Monetary Sovereignty debunks all the lies that sustain this delusion and human suffering. People who reject the facts of Monetary Sovereignty are those who habitually cling to the lies that sustain their hate.
“Federal tax revenues are destroyed upon receipt? Ridiculous!”
“Why do you think it’s ridiculous?”
“Because it just is. Besides, most people agree with me.”
Once a person is habituated, he can only break out of his habit by having a sincere desire to fully understand something. This desire must be charitable (or at least neutral) and not simply a desire to refine one’s hateful delusions. Developing this charitable desire is always a matter of choice (i.e. free will). No one can create it in us.
Reader “Smerls” is an example of someone who has made the choice to sincerely and positively try to understand, but “Smerls” has not been given enough help by MMT people. I blame this on the MMT people. They tend to be academics who chatter with each other in an academic bubble — which is why no one hears them outside their bubble, and also why they never notice or correct their errors, such as “taxes drive money.”
As I noted above, I myself do not read MMT blogs. They are too annoying.